Section 1 Flashcards
(11 cards)
Which of the following statements includes the most useful guidance for practicing accountants concerning the FASB Accounting Standards Codification.
The Codification includes all authoritative principles generally accepted and adopted before the Codification. This includes parts of APB Opinions, FASB Interpretations, and others. The Codification includes all authoritative GAAP for nongovernmental entities.
When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of:
Economic entity
What is the underlying concept governing the Generally Accepted Accounting Principles pertaining to recording gain contingencies?
Conservatism.
Why are gain contingencies governed by the concept of conservatism?
Gain contingencies are not recognized, but loss contingencies that are probable and estimable are recognized. This is a classic example of conservatism, which suppresses positive information under conditions of uncertainty but requires the reporting of negative information when the negative outcome is likely.
According to the conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of:
Cost-benefit
Guidance for determining fair value as provided in the fair value framework presented in ASC 820, “Fair Value Measurement,” would least likely apply to what?
The guidance for determining fair value provided in the fair value framework is not appropriate for determining the fair value of legal services received in exchange for an entity’s common stock. ASC 820 specifically exempts share-based payment transactions (and inventory valuing and other minor items) from the purview of the fair value framework.
What can be measured at fair value at the option of the reporting entity?
An entity may elect to measure and report a debt investment classified as held-to-maturity at fair value. Traditionally, debt investments classified as held-to-maturity would be measured and reported at amortized cost, but the provisions of the fair value option permit such investments to be measured and reported at fair value at the option of the reporting entity.
According to the IASB Framework for the Preparation and Presentation of Financial Statements, the qualitative characteristic of faithful representation includes:
The concept of faithful representation, includes completeness, neutrality, and free from error.
What are the two assumptions underlying the preparation and presentation of financial statements?
Accrual basis and going concern.
Under IFRS for SMEs, neither earnings per share (EPS), nor information by segment is required in financial statements. Why?
Because financial statements prepared under IFRS for SMEs are those of entities not traded on exchanges or otherwise required to file with regulatory agencies, earnings per share and segment reporting are not considered important information for users.
IFRS requires a classified Statement of Financial Position. What are the required classifications?
Current and non-current assets and liabilities.
