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67 Cards in this Set
- Front
- Back
Name the accounting standard-setting bodies in the US (past and present) |
Securities and Exchange Commission (SEC) Committee on Accounting Procedure (CAP) Accounting Principles Board (APB) Financial Accounting Standards Board (FASB) |
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List the Authoritative Literature Included in the FASB Accounting Standards Codification:
FEDPRIA |
1. Financial Accounting Standards Board (FASB) 2. Emerging Issues Task Force (EITF) 3. Derivative Implementation Group Issues 4. Accounting Principles Board Opinions 5. Accounting Research Bulletins 6. Accounting Interpretations 7. AICPA
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Financial Accounting Standards Board (FASB) relevant literature to the Codification
SITIP 138 |
a) Statements of Financial Accounting Standards (SFAS) b) Interpretations c) Technical Bulletins d) Staff Implementation Guides 3) Staff Positions f) Statement No. 138 Examples |
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AICPA relevant literature to the Codification |
a) Statements of Position b) Auditing and Accounting Guides (incremental guidance only) c) Practice Bulletins d) Technical Inquiry Service |
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SEC Standards Included in the Codification |
a) Regulation S-X b) Financial Reporting Releases (FRR) c) Accounting Series Releases (ASR) d) Interpretative Releases e) Staff Accounting Bulletins f) EITF Topic D and SEC Staff Observer Comments
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What is the main objective of the International Accounting Standards Board (IASB) |
To develop a single set of high-quality global accounting stadards |
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IFRIC |
International Financial Reporting Interpretations Committee - provides guidance on newly identified reporting issues not addressed in the IFRS. IT is sponsored by IASB and provides support when needed |
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International Financial Reporting Standards (IFRS) inlcudes: |
IFRS IASs Interpretations developed by the IFRIC and the former SIC (Standing Interpr. Committee) |
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A mutual goal of the FASB and the IASB is to: |
converge the accounting standards used in the US and throughout the world |
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SFAC |
Statements of Financial Accounting Concepts serve as the basis for FASB pronouncements but ARE NOT considered GAAP |
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SFAC No.8 - Conceptual Framework for Financial Reporting - Chapter 1: The objective of General Purpose Financial Reporting |
The main purpose is to disclose the entity's performance through providing useful financial information to primary users of the financial reports. (uses accrual basis accounting) |
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Primary users of General Purpose Financial Reports are: |
external users: existing, potential investors, lenders, creditors, |
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SFAC No.8 - Conceptual Framework for Financial Reporting - Chapter 3: Qualitative Characteristics of Useful Financial Information includes 2 things: |
1. Fundamental Qualitative Characteristics 2. Enhancing Qualitative Characteristics |
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SFAC No.7 "Using Cash Flow Information and Present Value Accounting Measurements"
5 Elements of PV Measurement (UVOTE) |
1) The price for bearing Uncertainty 2) Expectation about timing Variation of FCF (should it be at the ending period or beginning. think leases) 3) Other factors (liquidity, exchange, inflation) 4) TVM 5) Estimate of FCF
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Fundamental Qualitative Characteristics |
a) Relevance b) Faithful Representation |
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Relevance (PCM) |
Means capable of making a difference in the decision making process of a user
Passing Confirms Money
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Characteristics of relevance (PCM) |
Predictive Value Confirming Valye Materiality |
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Faithful representation (aka reliable) |
Complete - all necessary information is included Neutral - free from bias Free from Error - no error in presentation, selection or error off of omission |
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Enhancing Qualitative Characteristics |
Compare and Verify in Time to Understand |
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Replacement cost: |
is defined as the amount of cash or equivalent that would be paid to acquire or replace and asset currently. it is an acquisition costs. |
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List the full set of 5 financial Statements as seen in SFAC NO. 5 "Recognition and Measurement in the FS" |
Statement of Financial Position Statement of Earnings Statement of Comprehensive Income' Statement of Cash Flows Statement of Changes in Owner's Equity |
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Fundamental Assumptions of US GAAP (10) |
entity assumption - entity separate from owner going concern monetary unit periodicity historical cost principle revenue recognition principle (earned, realized or realizable) matching principle accrual accounting full disclosure principle conservatism principle |
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Fundamental Assumptions of IASB's IFRS |
accrual basis accounting going concern |
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SFAC No. 6 - Elements of Financial Statements (REGL ALE needs ID + Comp Inc) |
Revenue Expense Gain Loss
Assets Liabilities Equity
Investment by Owners Distributions to Owners (both excl. from Comprehensive Income)
Comprehensive Income |
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how to calculate Comprehensive Income |
Net Income + Other Comprehensive Income = Comprehensive Income |
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IFRS Elements of Financial Statements |
ALE + Income (RG) & Expense (EL) Capital Maintenance Adjustments - Increase and decrease in equity that arises from revaluation or restatements of A&L |
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The purpose of Income Statements is to: |
provide information about the performance of the company for a period of time. |
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The uses of Income Statements is to: |
determine profitability, value for investment purposes, credit worthiness |
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Presentation order of Major Components for Income Statement and Retained Earning Statement |
Income from continuing ops (gross and net of tax) Discontinued ops Extraordinary items Accounting changes and error correction |
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Basic Multi-step Income Statement |
Normal Operations Non-operating Income before taxes Income after taxes aka net income aka income from continuing operations |
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Basic Single-step Income Statement |
Revenue and other items Net Income aka income from cont. ops |
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Discontinued ops: 6 requirements for Held For Sale classification |
1. Mgmt committed to a plan to sell 2. Component is available for immediate sale as is 3. actively seeking buyes 4. the sale of component is probable withing a year 5. the sale is actively marketed 6. actions to complete the sale make it unlikely that the plan will be withdrawn of significant changes will be made to it |
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Accounting Rules for discontinued operations |
eliminate from ongoing operations no future significant involvement of the entity after sale of the component |
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Discontinued Operations items (nox) |
-Impairment loss (carrying value>fv-cost of sale aka net realizable value) - initial and subsequent -G/L on disposal -results of operations of the component
*gain after impairment ca be recognized to the extend of the previous impairment booked |
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Extraordinary items (under US GAAP) have to be (nox) |
unusual AND infrequent -material in nature -characteristic significantly different from normal -not expected to recur in the foreseeable future - not normally considered in regular ops |
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Extraordinary items under IFRS |
DO NOT EXIST |
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Material unusual OR infrequent items |
are part of non-operating items in the continuing ops and NOT extraordinary |
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4 Examples of extraordinary items |
-loss from natural disaster of unusual nature -expropriation by government -prohibition of product line -certain LTD write-off if specifically stated to be unusual and infrequent |
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Where are changes recorded when they arise due to accounting changes? |
Statement of Retained Earnings as adjustment to beginning retained earning |
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name 3 types of accounting changes |
1. changes in accounting estimate (prospective) 2. changes in accounting principle (retrospective GR) 3. changes in accounting entity |
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Changes in accounting estimate are (hint. depreciation schedule) |
PROSPECTIVE - going forward
-change in useful life estimate -change in accounting principle inseparable from change in estimate -unless material, they do not require a note |
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Changes in accounting principle |
RETROSPECTIVE - adjust the past
apply to GAAP/GAAP or IFRS/IFRS changes only |
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Exception to the General Rule of Changes in Accounting Principles |
anything that is changed to LIFO or related to changes in depreciation method need to be PROSPECTIVE |
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Changes in accounting entity require: |
RESTATE (note. IFRS does not include the concept of change in accounting entity) |
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Error Correction is recorded as |
PRIOR PERIOD ADJUSTMENT and requires RESTATEMENT examples. Non-GAAP to GAAP and vice versa |
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Comprehensive Income drills down to: |
NON OWNER TRASACTIONS Net income + OCI - Comprehensive Income |
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OCI - Other Comprehensive Income -> direct to Equity -> will need reclassification |
PUFE likes to Revalue his Income
Pension adjustments (gain or loss) Unrealized g/l (av-f-s- secs) Foreign currency items (gain or loss) Effective portion cash flow hedges
Revaluation surplus (IFRS Only) |
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comprehensive income presentation
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Single statement approach with Income Statement (Start with Revenue)
or separately as Statement of Comprehensive Income (Start with NI) |
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Classified balance sheet means: |
it distinguishes current from non-current items |
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Summary of Significant Accounting Policies under US GAAP is |
the first/second note of financial statements that includes information about measurement bases, accounting principles and methods used, criteria, policies and pricing utilized
GR: include things that won't be included in other places |
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2 main IFRS's requirements for Notes to Financial Statements include: |
1) disclosure of judgments and estimates that management has made in the process of accounting policies that have a significant effect on the financial statements (GAAP only needs estimates)
2)explicit and unreserved statement that IFRS is being applied
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Remaining Notes to Financial Statements (~7) |
-changes in equity incl. capital stock, PIC, RE, TS -required marketable securities information -contingency losses (possible future lawsuits) -pension plan description -post BS disclosure -related party transactions -disclosure of risk & uncertainties |
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Disclosure of Risks & Uncertainties in Notes to Financial Statements under IFRS are: |
much narrower and drill down to identifying estimates with high risks of being wrong in the future due to inadequate information at present |
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Interim financial reporting aka. |
Quarterly financial reporting is not required by either IFRS or GAAP. However, SEC requires that if the entity is a publicly traded company |
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Interim financial reporting characteristics (~5): |
-timeliness over reliability -has to be explicitly marked as unaudited -matching revenue and expenses by quarter -income tax calculation under GAAP is to use YTD income*estimated effective annual tax rate and then subtract from provision from last quarter (estimate is that of the best available information) -other issues that might affect the quarterly reporting and cause to either be overvalued or undervalued (eg seasonality factor) |
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Segment reporting is required by IFRS and GAAP for: |
Public companies only |
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Operating segment is: |
a component of an enterprise: - that engages in business activity from which it may earn revenue and incur expenses -whose operating results are regularly reviewed by Chief Operating Decision Maker (CODM) -for which discrete information is available
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Reportable segments are: |
hose that meet reporting criteria for separate reporting |
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2 Quantitative Thresholds for Reportable Segments (think materiality test) |
1) 10% size test (Total amounts of combined, both external and internal) a)revenue b)reported P&L c)Assets
2) 75% reporting sufficiency test (Total amount of consolidated amount vs external amounts only) keep adding segments until the combination of at least 75% of external (consolidated) revenue of segments is reported
3) all other segments are then lumped together |
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Segment Profit (Loss) formula |
Revenues (internal and external) Less: Directly traceable costs Less: Reasonably Allocated costs Operating Profit (Loss) aka EBIT
items excluded: general, interest exp, income tax exp |
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name SEC required forms for domestic companies |
10-K - Annual Report 10-Q - Quarterly Report 11-K - Annual report on benefit plan(s) 8-K - major events Form 3, 4, 5 - higher ups and 10% or more beneficial stock owners
around 50 required forms total |
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name 2 SEC required forms for foreign entities trading in the US |
20-F and 40-F (specific Canadian companies) 6-K |
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Regulation S-X (17 CFR part 210) |
form and content and requirements for interim and annual financial statements to be filed with SEC |
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SEC Requirement for Interim Financial Statements: |
BS IS Statement of CF
reviewed by an independent public auditor but doesn't have to be audited. must include "unaudited" in the notes.
quarterly for domestic, semi-annual for foregin |
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SEC Requirement for Annual Financial Statements |
Audit requirement Period Presented (BS-2 IS/CF-3) |
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XBLR |
Extensible Business Reporting Language, software utilizing data tags using XML language to describe financial information for business and financial reporting.
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SEC filing timeline (3) |
60 days after FYE - large accelerated filers (>$700mln in global market value of outstanding equity held by 3rd parties) 75 days after FYE - accelerated filers 90 days after FYE - all others (<75$mln)
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