Deck 1 Flashcards Preview

FAR 2 > Deck 1 > Flashcards

Flashcards in Deck 1 Deck (20):
1

Ingredients of faithful representation include:

Completeness, Neutrality, and Freedom from Error

2

Ingredients of relevance include:

Materiality, Predictive value, and Confirmatory value

3

Realization concept

Revenues and gains are realized when assets are exchanged for cash or claims to cash

4

Rule of conservatism

Revenues and gains should be recognized when the earnings process is complete; but expenses and losses should be expensed immediately

5

When is revenue recognized?

When it is: 1) earned and 2) realized or realizable

6

Change from the cash basis to accrual basis of accounting?

Correction of an error (prior period adjustment)

7

How should items that are both unusual and infrequent be reported?

Separate component of income from continuing operations

8

Where are discontinued operations reported?

Included in calculation of net income after income from continuing operations; shown net of tax

9

Two major components of income statement

1) Income from continuing operations (gross and net of tax; 2) Discontinued operations (shown net of tax)

10

3 ways to calculate discontinued operations

1) Impairment loss; 2) gain/loss from actual operations; 3) gain/loss from disposal

11

Change from any method to LIFO and changes in depreciation methods are reported:

Prospectively (change in estimate)

12

Single statement approach

Starts with sales revenue and ends with comprehensive income

13

Two statement approach

Starts with net income (per separate statement) and ends with comprehensive income

14

Where is accumulated other comprehensive income reported?

Balance sheet as part of equity

15

Interim period income tax expense =

Estimated annual effective tax rate applied to the year-to-date income before taxes minus the tax expense recognized in previous periods

16

Reportable segment test

1. 10% of all combined revenue; 2. 10% of profit or loss; 3. 10% of all assets

17

Regulation S-X

Sets forth the form and content of and requirements of interim and annual financial statements

18

Discontinued operations are always shown:

Net of tax

19

As time passes in a capital lease, what happens to the interest revenue and lease receivable?

They both decrease

20

Rent expense for an operating lease =

base rent + amortization of lease bonus