FAR 1 Flashcards
(47 cards)
1- Name the single source of authoritative nongovernmental U.S. GAAP?
The FASB “Accounting Standards Codification” (ASC)
2- The term “International Financial Reporting Standards” includes what standards?
- International Accounting Standards (IAS)
- International Financial Reporting Standards (IFRS)
- IFRIC Interpretations
- SIC interpretation
3- Who are the primary users of general Purpose Financial reports?
Existing and potential
- Investors
- Lenders
- Other Creditors
4- Name the pervasive Constraint on the information provided in financial reporting?
Cost Constraint:
The benefits or reporting financial information must be greater than the costs of obtaining and presenting the information.
5- Name the fundamental qualitative characteristics of useful financial information?
Relevance and Faithful Representation
6- Name the Three elements of Relevance?
- Predictive Value
- Confirming Value
- Materiality
7- Name the three elements of Faithful Representation
- Neutrality
- Completeness
- Freedom from Error
8- Name the enhancing qualitative characteristic of financial information?
-Comparability, Verifiability, Timeliness, and Understandability.
9- According to SFAC#5 what should a full set of financial statement include?
- Statement of Financial Position (The Balance Sheet)
- Statement of Earnings (The income statements)
- Statement of Cash Flows
- Statement of Changes in Owner’s Equity.
10- What is the difference between Realization and Recognition?
- Realization: When sold and converted to cash (or Claims to Cash)
- Recognition: When recorded in the financial statements
11- List the 10 elements of financial statements according to SFAC#6. “CREG and LALEID”
-comprehensive Income
-Revenues
-Expenses
-Gains
and
-Losses
-Assets
-Liabilities
-Equity(of Net Assets)
-Investments by Owners
-Distribution to Owners
12-List the six elements of financial statement according to the IASB Framwork.
- Assets
- Liabilities
- Equity
- Income(revenue and gains)
- Expenses (expenses and losses)
- Capital Maintenance adjustments.
13- Name the five elements of present Value measurements per SFAC #7. “EVTUO”
- Estimate of future cash flow
- Expectation about timing Variations of Future cash flows .
- Time value of money (the risk-free rate of interest).
- The price for bearing Uncertainty.
- Other factors(e.g. Liquidity issues and market imperfection.
14-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.
15- What is the presentation order of the major components of an income and retained earnings statement? “IDEA”
- Income Statement 1. Income or (loss) from continuing operations. 2- Income or (loss) form Discontinued operations. 3- Extraordinary Items.
- Retained Earnings Statements. 1- Cumulative effect of a change in Accounting principle.
16- The gain (loss) from discontinued operation can consist of…
AN impairment loss, a gain (loss) from actual operation, and a gain (loss) on disposal.
17- 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.
18- In reporting discontinued operations, how is a “component’ of an entity defined under U.S. GAAP and IFRS?
U.S.GAAP. 1-an operating segment. 2- A reportable segment. 3. A reporting Unit. 4- A subsidiary. 5- An Asset group. IFRS: 1-A separate major line of business or geographical area of operation. 2-A subsidiary acquired exclusively with a view to resale.
19-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.
20-What types of cost are associated with exit and disposal activities?
- Involuntary employee-termination benefits.
- Cost to terminate a contract that is not a capital lease.
- Other costs associated with exit or disposal activities.
21-Define Extraordinary items.
- Material in nature.
- Of a character significantly different form 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.
- Key words(unusual and infrequent)
- Remember. Extraordinary item are recognized under U.S CAAP but not IFRS.
22-List some examples of extraordinary items?
- The abandonment of, or damage to, a plant due to an infrequent earthquake or an infrequent food.
- An expropriation of a plant by the the government.
- A prohibition of a product line by a newly enacted law or regulation.
23-Name the three types of accounting changes
- Change in accounting principle(retrospective)
- Change in accounting estimate(prospectively)
- Change in accounting entity(retrospective)
- Error Correction (prior period adjustment)
24- How is a change in accounting principle reported?
- Cumulative effect of change is included in the retained earnings statement as an adjustment of the beginning retained earning balance of the earliest year presented.
- Prior-Period financial statement are restated, if presented.
