FAR 1 Flashcards by Samrithi Suresh

GAAP

General purpose financial reporting framework

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OCBOA- other comprehensive basis of accounting

Special purpose financial reporting framework

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OCBOA titles

Is not equal to GAAP titles

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Prospective F/s

Forecasting
Projection

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Forecasting prospective

Expectations

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Projection prospective

What if scenario (I.e hypothetical)

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Changes in accounting estimates

Prospective

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Changes in accounting principles and reporting entity

Retrospective

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Correction of errors

They are prior period adjustments not considered as accounting changes

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Changes in accounting principles

GAAP - GAAP
I.e one accounting principle to another acceptable accounting principle

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When there is a change in accounting principle inseparable from an change in accounting estimate

It is treated as change in accounting estimate

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Restatement refers to

Correction of errors

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Changes the result in f/s that are in effect to reporting estimate

The financial statements of all prior periods presented should be restated

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Use the new accounting estimate in the current and future period - accounting treatment

Changes in accounting estimate

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Do not restate or retrospectively adjust F/s of prior periods

Change in accounting estimate

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Disclose effect on continuous operations, net income and eps of the current period for a change in estimate that several affects several future periods

Changes in accounting estimate

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Current period use the accounting principle in the current accounting period

Change in accounting principles

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Retrospective application of a new accounting principle to all prior periods (exception of impracticability)

Changes in accounting principles

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The change on periods prior to those presented by adjusting the opening balance of assets and liabilities for the earliest period presented and making offsetting adjustments to the opening balance of R/E first that period

Prior period presented (cumulative effect)

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F/s for each individual prior period presented shall be adjusted to reflect the period-specific nature affects of applying the new accounting principle

Prior periods presented- comparative methods

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Present financial information for the new reporting entity for current period and all prior periods presented

Changes in reporting entity

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Use the new reporting entity in the current accounting period

Changes in reporting entity

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Comparative format - retrospective treatment to reflect information for the new entity

Changes is reporting entity - prior period

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Not an accounting change

Correction of errors

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Any error in f/s of a prior period discovered after f/s are issued or are available to be issued shall be reported as

Error correction

F/s for each individual prior period presented shall be adjusted for to reflect the correction of the period -specific effects of the error

Correction of error - prior period (comparative)

Accrual basis of recognition- cash receipts/expenditure

Accrual (yet to receive or pay)

Cash receipts/ expenditure - accrual basis of recognition

Deferral (received in advance or paid in advance

Defrrred revenue

Unearned revenue or deferred credits (cash is received but revenue is not earned )

Deferred expense (prepaid or deferred charge)

Cash is paid in advance but not incurred

Recognition of revenue earned but cash not received

Accrual revenue

Accrual basis recognition

(Yet to receive or pay)

SEC requirement apply to company registered with SEC which include

1. Companies with publicly traded securities 2. Companies with assets > $10 mm and 2000 or more sharehokders

Regulation s-k

Lays out the reporting requirements

EDGAR

Electronic data gathering, analysis and retrieval system

Submitted to SEC when a company issues new securities

Registration statement S -1

Filed annually

Form 10k

Form 10 k by US issuers

Is a audited financial statement

Filed quarterly by US issuers

Form 10-Q

Non audited financial statements filed in eacb quarters

How many 10-Q form are filed for a year?

3 10-Q forms

How many 10k firm filed in a year ?

10k form filed for the last quarter of the year

Form 10-Q are reviewed by

Auditors

Regulation S-X

Closely relate to regulation s-k and set forth the form and content and requirements of interim and annual f/s to be filed with sec

Interim financial reporting

Required for SEC registration 10-Q (Quarterly)

Form 10-Q is a requirement for

SEC not US GAAP REQUIREMENTS

Requirements for annual f/s period presented

B/s - 2 fiscal years I/s, c/f, s/e - 3 fiscal years

Requirements for interim f/s statements an periods presented

B/s - 2 years - end if most recent fiscal quarter - end if the preceding fiscal year I/s - 4 - the most recent fiscal quarter - period between the end of the preceding fiscal year and the end of most recent fiscal year - the corresponding period of the preceding fiscal year

Form 11-k

Annual report of a company’s employee benefit plan

Company’s taxable income for the year is know as

Income tax provision

The 5 step approach of revenue recognition

CPA APP for Revenue Recognition C - contract P - performance obligation A - amount App - allocate the transaction price to performance obligation in the contract RR - revenue recognition

Performance obligations is

Deliverables to the customer

Form 20-f and 40-f

Filed annually by foreign private issuers

Form 6-k

Filed semi-annually by the foreign issuers

Form 8-k

Filed to report material events that affect company such as M&A, changes in director or CEO, other major change in operations or status, changes in auditor etc

And this form 8-k must be filed

Within 4 business days of the occurrence of the event

The price that would be received to sell and asset and paid to liability in an orderly arm’s length transaction between market participants

FV (fair value)

Fair value is the ——- price

Exit price

Steps to apply FV measurement

1. Determine principal market 2. Determine valuation premise 3. Determine appropriate valuation technique 4. Obtain inputs for FV valuation 5. Calculate FV

Determine principal market if

The market with the greatest volume and maximum level of activity

I’m f principal market is not known

Use the most advantageous market I.e - FV - cost to sell = NRV

Change in technique is considered to be

A change in accounting estimate

To determine FV Appropriate techniques

Market approach -FMV Income approach - PV Cost approach

Notes to F/s

Provides disclosure as per us GAAP to facilitate users to understand f/s

Significant accounting policy

Initial note

Remaining note to f/s

All other relevant information

Going concern doubt

Substantial doubt

Double declining balance is an

Accelerated depreciation

Calculation of DDB

Straight * 2

Obtain inputs for valuation requirements

Hierarchy level 1,2,3

Discontinued operations if it satisfies

Components of the entity and held for sale

Statement of earnings

ON -TID-NOC

Accumulated OCI IS

The cumulative OCI for all periods in B/s

Excess of Net income in I/s what will be in b/s

Retained earnings

How are discontinued operation that’s occur at mid year initially reported ?

Includes in net income and disclosed in the note statement of equity

Discontinued operations and extraordinary items ade included in

Net income and disclosed in the note to f/s

Income statement

Statement of earrings and comprehensive income

SEC

Security exachange commission

SEC was established in

1934 under the security exchange act

FASB

Financial accounting standards board

FASB issued

Statement of financial accounting standards

FASB reorganised all GAAP pronouncement to create

ASC - accounting standard codification

FASB =

US GAAP

IASB - international accounting standards board =

IFRS - international financial reporting standards

Summary of Significant accounting policies are included as a integral part of f/s to identify and describe

- principles and methods, recognition criteria, measurement basis

Reversal of impairment loss that was earlier recognised is not allowed under

US GAAP so they will not have a impact

Cash flow hedges effective portion goes to

OCI

Cash flow hedge ineffective portion goes to

I/s

Disclosure to prospective f/s includes

Summary to significant account policy and summary to significant assumptions

Financial capital maintenance concepts are applied to both

Current net income and comprehensive income