Name the single source of authoritative nongovernmental U.S. GAAP
The FASB “Accounting Standards Codification” ASC
The term “International Financial Reporting Standards” includes what standards
International Accounting Standards (IAS)
International Financial Reporting Standards (IFRS)
IFRIC Interpretations
SIC Interpretations
Who are the primary users of general purpose financial reports?
Existing and Potential:
Investors
Lenders
Other Creditors
Name the pervasive constraint on the information provided in financial reporting
Cost Constraint:
The benefits of reporting financial information must be greater than the costs of obtaining and presenting the information
Name the fundamental qualitative characteristics of useful financial information
Relevance and Faithful Representation
Name the Elements of relevance
Predictive value
Confirming value
Materiality
Name the three elements of faithful representation
Completeness
Neutrality
Freedom from Error
Name the enhancing qualitative characteristics of financial information
Comparability
Verifiability
Timeliness
Understandability
According to SFAC #5 what should a full set of financial statements include
Statement of Financial Position Statement of earnings Statement of Comprehensive Income Statement of Cash Flows Statement of Changes in Owners Equity
What is the difference between realization and recognition
Realization-When sold and converted to cash
Recognition-When recorded in the financial statements
List 10 elements of financial statements according to SFAC #6
CREG and LALEID
Comprehensive Income Revenues Expenses Gains and Losses Assets Liabilities Equity Investments by Owners Distributions to Owners
List the six elements of financial statements according to the IASB Framework
Assets Liabilities Equity Income Expenses Capital maintenance adjustments
Name the five elements of present value measurement per SFAC #7
EVTUO
Estimate of future cash flow
Expectations about timing Variations of future cash flows
Time value of money (the risk free rate of interest)
The price for bearing Uncertainty
Other factors (eg liquidity issues and market imperfections)
Describe the expected cash flow approach for present value computations
Considers a range of possible cash flows and assigns a (subjective) probability to each cash flow in the range to determine the weighted average or “expected” future cash flow
What is the presentation order of the major components of an income and retained earnings statement
IDEA
Income From Continuing Operations
Discontinued Operations
Extraordinary Items
Changes in Accounting Principle
The gain (loss) from discontinued operations can consist of
An impairment loss, a gain (loss) from actual operations, and a gain (loss) on disposal
In what period are the following reported:
An impairment loss?
A gain (loss) from actual operations?
A gain (loss) on disposal
All are reported in the period in which they occur
In reporting discontinued operations, how is a “component” of an entity defined under U.S. GAAP and IFRS
U.S. GAAP An operating segment A reportable segment A reporting unit A subsidiary An asset group IFRS A separate major line of business or geographical area of operations A subsidiary acquired exclusively with a view to resale
How do we account for subsequent increases in the fair value of a discontinued component
A gain is recognized for the subsequent increase in fair value minus costs to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.
What types of costs are associated with the exit and disposal activities
Involuntary employee termination
Costs to terminate a contract that is not a capital lease
Other costs associated with exit or disposal activities
Define extraordinary items
Material in Nature
Of a character significantly different from the typical or customary business activities (unusual)
Not expected to recur in the foreseeable future (infrequent)
Not normally considered in evaluating the ordinary operating results of an enterprise
List some examples of extraordinary items
The abandonment of, or damage to, a plant due to an infrequent earthquake or an infrequent flood
An expropriation of a plant by the government
A prohibition of a product line by a newly enacted law or regulation.
Name the three types of accounting changes
Change in accounting principle
Change in accounting estimate
Change in accounting entity
How is a change in accounting principle reported?
A cumulative effect of change is included in the retained earnings statement as an adjustment of the beginning retained earnings balance of the earliest year presented
Prior period financial statements are restated if presented
What are the special changes in accounting principle?
How are special changes in accounting principle reported?
A change to LIFO from another method of inventory pricing under U.S. GAAP
Any other change in which a cumulative effect adjustment is considered impractical to calculate
Special changes are reported prospectively (like a change in estimate)
How is a change in an accounting estimate reported
Prospectively
The effect is shown in the current and or future periods that are affected by the change
Financial statements are not restated
Under U.S. GAAP, how is a change in the accounting entity reported?
All current and prior period financial statements are restated
How are error corrections reported?
Reported as prior period adjustments to retained earnings and all comparative financial statements presented are restated
Define comprehensive income
Change in equity (net assets) that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners and distributions to owners
Identify five items included in other comprehensive income
PUFER
Pension Adjustments
Unrealized gains and losses on available for sale securities
Foreign currency translation adjustments and gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in foreign entity
Effective portion of flow hedges
Revaluation surpluses (IFRS only)
List the three formats acceptable for reporting comprehensive income. Which format prohibited under IFRS?
Statement of Comprehensive Income (Single Statement Approach)
Statement of Income followed by separate Statement of Comprehensive Income (Two statement approach)
Component of the statement of owners’ equity
List some disclosure requirements for comprehensive income
Tax effects of each component included in current “other comprehensive income”
Changes in the accumulated balances of components of “other comprehensive income”
Total accumulated other comprehensive income
Reclassification adjustments between other comprehensive income and net income
Identify the contents of the summary of significant accounting policies note to the financial statements
Identify and Describe Measurement bases used in preparing the financial statements Principles and methods Criteria Policies Pricing
Describe the related party disclosures required under U.S. GAAP and IFRS
Material related party transactions
Related party notes/accounts receivable
Control Relationships
Note IFRS requires disclosures of key management compensation US GAAP does not require this disclosure
What are the US GAAP disclosures requirements for risks and uncertainties
Nature of operations
Use of estimates in preparing the financial statements
Significant estimates
Current Vulnerability due to certain concentrations
