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Flashcards in Financial Accounting Standards Deck (73)
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1

Define Recognition.

A recognized item is recorded in an account and ultimately affects the financial statements.

2

What was the Wheat Committee responsible for?

The formation of FASB

3

What steps does FASB take to issue a new accounting standard?

1. Considers whether to add a project to its agenda
2. Conducts research on the topic and issues a Discussion Memorandum detailing the issues surrounding the topic;
3. Holds public hearings on the topic;
4. Evaluates the research and comments from interested parties and issues an Exposure Draft - the initial accounting standard;
5. Solicits additional comments, modifies the Exposure Draft if needed;
6. Finalizes the new accounting guidance and approves with a majority vote
7. Issues an Accounting Standards Update (ASU).

4

How to convert Cash to Accrual?

cash basis + beginning liabilities - ending liabilities - begginning assets + ending assets = accrual basis

5

How are Property, Plant and Equipment and Intangibles valued?

Historical Cost and Depreciated/Amortized Historical Cost

6

How are Receivables valued?

Net Realizable Value

7

How is inventory valued?

Lower of Cost or Market

8

Can an investment in a subsidiary to be consilidated be measured at fair value?

No

9

How is the fair value of an asset and liability determined? (Entry or Exit Price)

Asset: Exit Price, Liability: Exit Price

10

How is an investment in Marketable Secuirties measured?

Market Value

11

How is a liability measured?

Present value

12

How is Owners Equity valued?

Historal Value of Cash Inflows

13

What is a cash equivalent?

Short term investment that is convertaible into a known and fixed amount of cash and have an original maturity to the purchaser of three months or less

14

Define operating cash flows.

Cash flows related to transactions that flow through the income statement.

Cash receipts
Interest revenue
Payments to suppliers, employees

15

Explain Investing Cash Flows

Cash flow related to the acquisition and disposal of long term assets and investments.

Purchase it sell plant and equipment or investments

16

Explain the Financing Cash Flow.

Cash flows relating to liabilities and owners equity

Debt issuing and retiring
Paying dividends

17

What are the 2 primary qualitative characteristics?

Relevance and faithful representation

18

Name the three parts that make up Relevance.

Predictive value, confirmatory value and materiality

19

Name the three items that make up Faithful Representation.

Completeness, Neutrality and Free from Error

20

Name the 4 Enhancing Qualitative Characteristics

1. Comparability
2. Verifiability
3. Timeliness
4. Understandability

21

Define Relevance

Information is relevant if it makes a difference to decision makers in their role as capital providers.

22

Define Predictive Value

Information has predictive value if it assists capital providers in forming expectations about future events.

23

Define Confirmatory Value

Information has confirmatory value if it confirms or changes past (or present) expectations based on previous evaluations.

24

Define Materiality

Materiality is somewhat pervasive throughout the objectives of financial reporting in the sense that the financial statements should present material information because it is decision useful.

25

Define Faithful Representation

Information faithfully represents an economic condition or situation when the reported measure and the condition or situation are in agreement

26

Define Completeness

information is complete if it includes all data necessary to be faithfully representative.

27

Define Neutral

information is neutral when it is free from any bias intended to attain a prespecified result, or to encourage or discourage certain behavior.

28

Define free from error

information is free from error if there are no omissions or errors.

29

Define Comparability

The quality of information that enables users to identify similarities and differences between sets of information.

30

Define Verifiability

Information is verifiable if different knowledgeable and independent observers could reach similar conclusions based on the information.