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FAR > Financial Reporting > Flashcards

Financial Reporting Flashcards

1
Q

To measure income

A

Financial Reporting

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2
Q

The FASB Codification

All pronouncements fall under the Codification umbrella

A

Financial Reporting

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3
Q

Authoritative and Non-Authoritative

A

Financial Reporting

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4
Q

Managerial Accounting has a timeliness focus

Managerial Accounting is not required to follow GAAP

A

Financial Reporting

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5
Q

Form 10K - Annual and Audited

Form 10Q - Quarterly and Reviewed

A

Financial Reporting

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6
Q

Focus is on the needs of users to help them make decisions and assessments about the company

Does not make assessments of the economy

A

Financial Reporting

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7
Q

Cost vs. Benefit

Materiality

A

Financial Reporting

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8
Q

Consistency - Year vs. Year

Comparability - Company vs. Company

A

Financial Reporting

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9
Q

Relevance & Faithful Representation

Relevance - Makes a difference to the user
Includes:
Predictive Value - Future Trends
Confirming Value - Past Predictions
Materiality - Could affect User Decisions

Faithful Representation
Includes:
Completeness - Nothing omitted that would impact the decision-making of a user
Neutrality - Information is presented is without bias
Free from Error - No material errors or omissions

A

Financial Reporting

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10
Q

Comparability Verifiability Timeliness and Understandability

Comparability - Allows users to compare different items among various periods
Verifiability - Different people would reach a similar conclusion on the information presented
Timeliness - Information is made available early enough to impact the decision making of users
Understandability - Information is easy to understand

A

Financial Reporting

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11
Q

When an estimate is necessary due to uncertainty conservatism chooses the best option that won’t overstate the financial position of the company

A

Financial Reporting

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12
Q

Earned (Revenue) or Incurred (Expense) but no Cash Receipt/Outlay yet

A

Financial Reporting

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13
Q

Cash Receipt/Outlay but not Earned (Revenue) or Incurred (Expense)

A

Financial Reporting

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14
Q

When an item is recorded and included in the financial statements

A

Financial Reporting

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15
Q

The price you would receive if you sold the asset

Assumes asset is at its highest and best value

Assumes asset is sold at its most advantageous market to get the best price possible

A

Financial Reporting

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16
Q

Buyer and Seller are not Related

Buyer and Seller are Knowledgeable

Buyer and Seller are able to transact - i.e. This isn’t a hypothetical transaction for Fair Value measurement purposes. The buyer actually does have the $10M to purchase the asset you’re trying to value at $10M

Buyer and Seller are both motivated to buy/sell

A

Financial Reporting

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17
Q

Price quotes or market prices

For example NYSE or NASDAQ

A

Financial Reporting

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18
Q

Interest rates

Prime rate

A

Financial Reporting

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19
Q

Unobservable inputs such as assumptions or forecasts

Lowest priority for valuation

A

Financial Reporting

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20
Q

Market approach - uses market transactions and prices to value the asset

Income approach - uses present value discounts earnings

Cost approach - uses replacement cost to value the asset

A

Financial Reporting

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21
Q

Cash

Inventory or Assets expected to be converted or consumed during a business’ operating cycle

Deferred Gross Profit on Installment Sales (Contra Asset)

Receivables expected to be collected in 12 months or less

A

Financial Reporting

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22
Q

Liabilities that will use current assets during the present operating cycle

A

Financial Reporting

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23
Q

Expense that has been incurred but not paid

Example: rents payable

A

Financial Reporting

24
Q

A type of current liability

Payments that have been received but cannot be recorded as revenue yet

Example: Tenant pre-pays rent - Landlord still must perform to earn it and is a liability until this happens

A

Financial Reporting

25
Q

When they have been earned; i.e. company has performed

A

Financial Reporting

26
Q

Increase in equity from an activity or event that is not central to the main activities of the business

Can be operating or non-operating

A

Financial Reporting

27
Q

Decrease in equity from an activity or event that is not central to the main activities of the business

Can be operating or non-operating

A

Financial Reporting

28
Q

Average time it takes to turn materials or services into Cash

A

Financial Reporting

29
Q

Valuation method - the current value of a future amount of money using a specific interest rate

A

Financial Reporting

30
Q

How much an asset cost - (net of depreciation and amortization)

A

Financial Reporting

31
Q

How much it would cost to reacquire an asset today (Entrance Cost)

A

Financial Reporting

32
Q

The sale price of an asset (Exit Cost)

A

Financial Reporting

33
Q

Sale Price of an Asset - Selling/Disposal Fee

A

Financial Reporting

34
Q

Recognized when earned

If the royalty % is applied against net sales then subtract the estimated return amount from the gross sales first and then apply the royalty rate

A

Financial Reporting

35
Q

Revenue recognized upon receipt of cash

Only used when cash collection is uncertain

A

Financial Reporting

36
Q

Gross Profit that can’t be recognized until cash is received

D.GP : Gross Profit % x Accounts Receivable

Pay attention to the year if GP% varies

A

Financial Reporting

37
Q

No revenue recognized until all costs are recovered from purchase of the asset

Most conservative method of revenue recognition when collection of sale price is uncertain

A

Financial Reporting

38
Q

Payment has been received but performance is not complete.

As company performs revenue is recognized.

Recorded as a Deferred Revenue (Liability) on Balance Sheet

A

Financial Reporting

39
Q

Franchiser - Startup franchise fee revenue deferred until substantial performance

Franchisee - Costs are deferred until corresponding revenue is recognized

A

Financial Reporting

40
Q

Mnemonic: SPEAR-BAR

Sales (i.e. Customer Payments)
+ Ending Accounts Receivable
- Beginning Accounts Receivable
: Sales Revenue on an Accrual Basis

A

Financial Reporting

41
Q

Mnemonic: CRAP-I

Cash Remitted (i.e. paid)
+Increase in Accounts Payable
-Increase in Inventory
:COGS on an Accrual Basis

A

Financial Reporting

42
Q

Reported Net of Tax after Continuing Operations but before Extraordinary Items

Company decides to cease operating a segment of its business

Includes Income (or loss) from the period plus the gain (or loss) from disposal

A

Financial Reporting

43
Q

Both unusual AND infrequent

Reported Net of Tax after Discontinued Operations

Note: Usual or Infrequent Items are reported as part of Continuing Operations

A

Financial Reporting

44
Q

Adjusts assets to reflect a consistent level of purchasing power due to inflation

Uses the Consumer Price Index (CPI)

A

Financial Reporting

45
Q

When they are incurred. Accrue if not yet paid.

A

Financial Reporting

46
Q

Those incurred but not paid.

Product costs - Expenses should be matched with associated revenues as they are recognized (sales commission on a used car sale)

Period costs - Expenses amortized and recognized with the passage of time

A

Financial Reporting

47
Q

Immediately.

A

Financial Reporting

48
Q

Office staff salaries

Office/building rent

Office supplies

Note: Sales staff salaries and portions of the building assigned to Sales should be allocated to Selling Expense not G&A

A

Financial Reporting

49
Q

One-time costs for opening a new business

Expensed as they are incurred

A

Financial Reporting

50
Q

Interest on projects (software) for internal use is not expensed but is instead capitalized

A

Financial Reporting

51
Q

Net Income + Other Comprehensive Income (OCI):

Revenues/Expenses

Gains/Losses

Cumulative accounting adjustments

Reclassifications adjustments

Non-owner changes in equity

A

Financial Reporting

52
Q

Foreign Currency Translation Adjustments

Unrealized gains on AFS Securities

Minimum Pension Liability adjustment for defined benefit plans

A

Financial Reporting

53
Q

Avoids double counting items that were included in both Net Income and OCI

Example: AFS Securities previously included in OCI are now sold at a loss and reported on the Income Statement

A

Financial Reporting

54
Q

Reported in a Single or Combined Income Statement

A

Financial Reporting

55
Q

Accounting Principles used

Basis of Consolidation

Inventory Pricing Methods

Depreciation Method

Amortization of Intangibles

A

Financial Reporting

56
Q

Nature of Operations

Use of Estimates and listing of Significant Estimates

Concentration vulnerability

A

Financial Reporting

FAR (19 decks)

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