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ACCT 3311 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Conceptual Framework

A

Sets forth theory, concepts, and principles to ensure accounting standards are coherent and uniform. Doesn’t override the rules, but informs them.

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2
Q

2 Qualitative Characteristics of Financial Reporting

A

Fundamental and Enhancing Characteristics

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3
Q

Fundamental Characteristics definition

A

Distinguish useful info from not useful info

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4
Q

2 Fundamental Characterstics

A

Relevance and Faithful Representation

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5
Q

Relevance

A

Capable of making a difference in a decision

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6
Q

Relevance has 3 values

A

Predictive, Confirmatory, Matierality

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7
Q

Predictive Value

A

Helps predict future outcomes

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8
Q

Confirmatory Value

A

Confirms and compares with past financial statements

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9
Q

Matierality

A

Info that if omitted would affect financial statement users decisions

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10
Q

Faithful Representation

A

Is the financial info represented faithfully

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11
Q

Aspects of Faithful Representation

A

Complete, Neutral, Free from Error

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12
Q

Complete

A

Includes all info, both descriptions and explanations

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13
Q

Neutral

A

Info is free from bias

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14
Q

Free from Error

A

Info contains no mistakes or omissions. Estimates are okay though

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15
Q

Enhancing Characteristics

A

Helps distinguish whether more or less info is needed

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16
Q

4 types of Enhancing Characteristics

A

Comparability, Verifiability, Timeliness, Understandability

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17
Q

Comparability

A

Financial statement users can compare the financial statement with others from different companies

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18
Q

Verifiability

A

A group of financial statement users can check the info and come to the same conclusion

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19
Q

Timeliness

A

Info is available early enough to impact decision making

20
Q

Understandability

A

All info is present, in the right location, and understandable

21
Q

Cost Constraint

A

is the cost of requiring info equal to the benefit of presenting it

22
Q

2 Elements of Financial Reporting

A

Point in Time Elements, Period in Time Elements

23
Q

Point in Time Elements

A

Represent Resources, claims to resources, or interest in resources for a specific point in time

24
Q

Examples of Point in Time Elements

A

Assets, Liabilites, Equity

25
Q

Period of Time Elements

A

Events that occur between two balance sheet dates

26
Q

Comprehensive Income

A

All changes in equity during a period except those related to the owners

27
Q

IFRS changes from GAAP in which Element?

A

Period of Time Elements

28
Q

Recognition

A

Process of reporting an economic event. Should it be a Line Item in the Financial Statement or a Footnote?

29
Q

Recognition Criteria

A

Item is one of the Elements of financial statements/Item is measurable/Item must be Faithfully Represented or reliable/Item is Relevant

30
Q

Revenue can be recognized when?

A

Realized: Cash is exchanged OR Earned: seller has accomplished their end of the deal

31
Q

3 approaches to recognizing expenses

A

Match with revenues/Expense in the period incurred/Systematically expense over the period of use (depreciation)

32
Q

5 aspects of measurement

A

Historical Cost/Current Cost/Current Market Value/Net Realizable Value/Present Value of Future Cash Flows

33
Q

Historical Cost

A

Amount paid when asset was bought

34
Q

Current Cost

A

Amount that would be needed to BUY the asset today

35
Q

Current Market Value

A

Amount that would be needed to SELL the asset today

36
Q

Net Realizable Value

A

Amount from selling of asset minus the cost of getting rid of the asset from your business

37
Q

Present Value of Future Cash Flows

A

Discounting net cash flows the firm expects to receive on the exchange of an asset

38
Q

Arms Length Transactions

A

Transaction where buyer and seller are independent and unrelated

39
Q

Fair Value measurements require _____ according to FASB

A

Disclosure

40
Q

US GAAP is based on _____ accounting

A

Accrual

41
Q

Footnotes contain info about

A

Line Items on Financial statements, headings or categories on financial statemtnes, the reporting entity, Past events and current conditions that might affect the entitys cash flows

42
Q

Financial Reporting Assumptions

A

Going Concern Concept, Economic Entity Assumption, Monetary Unit Assumption, Periodicity Assumption

43
Q

Going Concern Concept

A

The Company in question is going to continue to exist for the forseeable future

44
Q

Economic Entity Assumption

A

All transactions and events are separate from the personal affairs of the owner

45
Q

Monetary Unit Assumption

A

The company will report its economic activities in dollars or another monetary unit

ACCT 3311 (13 decks)

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