Initial Notes Flashcards
FED PRIA
FASB - statements on financial accounting and reporting EITF - Emerging issues task force Derivatives Implementation Group APB - Accounting Principals Board Accounting Research Board Accounting Interpretations AICPA
SEC Standards
Regulation for Accounting is Emerging - Regulation S-X; Financial Reporting Releases (FRR); Accounting Series Releases (ASR); Interpretive Releases (IR); Staff Accounting Bulletins (SAB); EITF
Enhancing Qualitative Characteristics
Comparability - consistency
Verifiability - independent confirmability
Timeliness - quarterly
Understandability - verify the information is understandable
Cost restraint - benefits exceed the cost of doing so.
Fundamental Assumptions of US GAAP
Entity Assumption - separate corporation/division is necessary when required;
Going concern assumption - corp does not end at death of key members
Monetary Unit - deal in currency most often associated w/ business operations
Periodicity assumption - yearly/quarterly, etc:
Historical cost principal - cost, not current market value (most assets, not all)
Revenue recognition assumption - earned & realized (been paid)/realizable (accrual, expect to incur);
Matching principal - revenue and expenses
Accrual accounting - recognize revenue/gains when earning process is complete, incur expenses immediately
Full disclosure - completeness, footnotes, explanation
Rule of Conservatism - never overstate assets/revenues or understate liabilities/expenses.
IASB Fundamental Assumptions
Going Concern & Accrual Accounting.
IDEA - Order of presentation on Income Statement
I - Income from continuing operations, shown before tax (and net eventually), operating income/expenses and income from non-operating (gains and losses, equity)
D -discontinued operations (net of tax)
E - Extraordinary items (NET OF TAX unusual AND infrequent)
A - change in accounting principle, GR, change in retained earnings. (NET OF TAX change only allowed if it more fairly presents I/S)
Multiple-Step Income Statement
Reports core business separately from non-operating items.
Single-step Income Statement`
Total expenses including tax are lumped together; total revenues less total expenses.
Elements of Discontinued Operations
Net of tax - can consist of impairment loss; G/L from actual operations; G/L on disposal included in period in which they occur, not before they are sold.
HELD/Available FOR SALE
1- management commits to plan to sell.
2- immediately available to sell
3- actively marketed
4- probable sale and expected to occur w/ in a year (generally)
Available for sale - IFRS
Each asset and liability must be tested for impairment; under US GAAP, impairment is tested at the entity level.
Classification as discontinued operations “GEL”
G - disposal of major geographic area
E - disposal of major equity method investment
L - disposal of major line of business
Must be strategic shift and/or a major effect on operations
Extraordinary Items on IFRS
Not allowed under IFRS
Accounting Changes
Changes in accounting estimate - prospective change;
Changes in accounting principle - GR retrospective (GAAP to GAAP, IFRS to IFRS, required and more fairly states) if comparative are not being shown, book to RE prospectively. If comparable, have to restate all prior years;
Changes in accounting entity - restate financials
NOTE - corrections of error are not accounting changes.
changes in accounting principle inseparable from a change in estimate are made PROSPECTIVELY; no restatement of PY
Exceptions to GR on changes in accounting principle
Changes to LIFO and change in depreciation. handled prospectively
Comprehensive Income (non owner transactions) - PUFER
Pension adjustments
Unrealized gains and losses (AFS Securities)
Foreign currency items (translation adjustments)
Effective portion of cash flow hedged
Revaluation surplus (IFRS only)
IFRS - Full goodwill and partial goodwill definition when dealing with non-controlling interest
Full goodwill: NCI= FV of sub * NCI percentage
Partial goodwill: NCI= FV of subs net identifiable assets * NCI percentage
Acquisition method JE components
C -common stock of sub (eliminate) Dr APIC - addtnl paid in capital (eliminate) Dr R - R/E of sub (eliminate) Dr I - Investment in sub (FV purchase) Cr N - noncontrolling interest (if not 100%) Cr., remember full/partial goodwill method B - Balance sheet of sub to FV Dr. I - identifiable intangibles Dr. G - goodwill or gain (Dr. or Cr.)
OWNS - GAAP capital lease criteria
O - ownership transfer at end of term
W - written option for bargain purchase
N - 90% of leased property FV
S - 75% of useful life
OWESFACS - IFRS
O - ownership transfer
W - written bargain purchase option
E - Lease term is major part of economic life of asset
S - PV min lease payments amounts to @ least substantially all of FV
F - G/L from fluctuation in FV of residual accrual to lessee
A - lessee has the ability to continue lease for 2nd period
C - lessee can cancel the lease, lessor’s losses borne by the lessee
S - specialized nature, only lessee can use them w/ out modification
LUC - lessor, sales type/ direct financing lease criteria (GAAP)
L - lessor “owns” the leased property
U - uncertainties do not exist regarding un-reimbursable costs by the lessor
C - collectability of the lease payments is reasonably predictable.
Governmental Funds: GRaSPP
G - General Fund (general tax revenue)
R - Special Revenue Fund (specific taxes)
and
S - Debt Service Funds (payment of interest and principal on all general obligation debt)
P - Capital projects funds (assigned for construction/major capital assets)
P - permanent fund (legally restricted for public use)
Governmental Funds: MAC GRASPP
Modified Accrual Accounting; Current Financial Resource Measurement Function -
G - General Fund (general tax revenue)
R - Special Revenue Fund (specific taxes)
and
S - Debt Service Funds (payment of interest and principal on all general obligation debt)
P - Capital projects funds (assigned for construction/major capital assets)
P - permanent fund (legally restricted for public use)
Gov’t. Proprietary Funds: full accrual - treat like customer/not citizen - SE
S - Internal Service Funds
E - Enterprise Funds
