Term
| Objective of General Purpose Financial Reporting |
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Definition
| The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity (SFAC 8). |
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Term
| Qualitative Characteristics |
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Definition
Establish the criteria for selecting and evaluating accounting alternatives which will meet the objectives of financial reporting. Types:
Fundamental
1. Relevance
2. Faithful Representation
Enhancing
1. Comparability
2. Verifiability
3. Timeliness
4. Understandability |
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Term
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Definition
Level of capability for making a difference in a user's decision. Consists of one or both of the following:
1.Predictive Value
2.Confirmatory Value |
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Term
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Definition
| Usefulness in predicting future outcomes. |
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Term
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Definition
| Ability to confirm or change prior evaluations. |
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Term
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Definition
Ability to depict what it purports to represent. Should be:
1.Complete
2.Neutral
3.Free from Error |
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Term
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Definition
| Information is presented/depicted in a way that users can understand. |
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Term
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Definition
| Information is depicted without bias either favorably or unfavorably to users. |
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Term
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Definition
| Information that has no errors or omissions. |
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Term
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Definition
| Enables users to identify and understand similarities and differences between items. Achieved with consistency. |
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Term
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Definition
| The use of the same accounting methods in different periods. |
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Term
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Definition
| The occurrence of different sources reaching consensus/agreement on an amount of representation of an item. |
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Term
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Definition
| When information is available to a decision maker at a time that is useful for making decisions. |
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Term
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Definition
| How well information is classified, characterized, and presented. Ideally the information should be clear and concise but the assumption is that the user has a reasonable knowledge of business/economic activities to comprehend financial reports. |
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Term
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Definition
1) Probable future benefit
2) Access to benefit is obtained & controlled
3) Result of past event(s)
4) Continues until collected, transferred, used or destroyed
5) Valuation accounts are part of related asset |
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Term
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Definition
1) Obligation to be paid in future
2) Access to benefit is obtained & controlled
3) Result of past event(s)
4) Continues until settled/discharged
5) Valuation accounts are part of related liability |
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Term
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Definition
| The residual interest in the assets of an entity that remains after deducting liabilities. |
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Term
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Definition
| increases in assets or decreases in liabilities during a period from delivering goods, rendering services, or other activities constituting the entity's major/central operations; actual and/or expected; reported gross |
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Term
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Definition
| Decreases in assets or increases in liabilities during a period from delivery of goods, rendering of services, or other activities constituting the entity's major or central operations; actual and/or expected; reported gross |
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Term
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Definition
| increases in net assets resulting from transfers by other entities of something of value to obtain ownership. |
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Term
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Definition
| Decreases in net assets resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners. |
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Term
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Definition
| The change in equity of an entity during a period from transactions and other events of nonowner sources; all equity changes except investments and distributions. |
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Term
| Economic Entity Assumption |
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Definition
Economic activity can be identified with a particular unit of accountability. Note: However, you
can define the entity at a higher level (e.g., Parent) or a lower level (e.g., Subsidiary). |
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Term
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Definition
The business enterprise will have a long life. The going concern assumption does not apply if
liquidation of the business appears imminent. Note: The fair value of an asset irrelevant if we are a going concern and we need
this asset in our operations; this is another reason to use historical cost instead of fair value. |
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Term
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Definition
Money (the U.S. dollar) is the common denominator of economic activity and provides an
appropriate basis for accounting measurement and analysis. Note: We learned this is FC currency transaction and translation. |
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Term
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Definition
The economic activities of an enterprise can be divided into artificial time periods. We report financial
information periodically to apprise users of performance and economic status. Note: We learned this in interim reporting. |
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Term
| Historical Cost Principle |
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Definition
GAAP requires that most assets and liabilities be accounted for and reported on the basis of
acquisition price because it is the most reliable valuation. Note: There are exceptions (e.g., impairments, lower-of-cost-or market). |
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Term
| Revenue Recognition Principle |
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Definition
Revenue is generally recognized when
(1) realized or realizable and
(2) earned.
Revenues are realizable when assets received or held are readily convertible into cash or claims to cash. Revenues are considered earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.
Recognition at the time of sale provides a reasonable test. Exceptions to this rule are recognition
(1) during production (e.g.,
percentage of completion accounting for construction)
(2) upon receipt of cash (installment sales method or cost-recovery method of accounting)
(3) multiple-deliverable revenue arrangements and (4) milestone method of recognition on research and development contracts. |
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Term
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Definition
| Expenses are to be matched to the revenues whenever it is reasonable and practical to do so. |
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Term
| Full Disclosure Principle |
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Definition
Accountants use their judgment in deciding what gets reported on the financial statements. If
something does not appear on the statements, then it may appear in the footnotes or in supplementary information. The
footnotes generally amplify or explain the items in the main body of the statements. Supplementary information contains other
information that may be highly relevant, but less reliable. Note: Segment reporting is a good example of footnote disclosure. |
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Term
| Cost-Benefit Relationship |
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Definition
| Information is expensive. The costs of providing the information must not out-weigh the benefits that can be derived from using the information. |
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Term
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Definition
| An item is considered material if its inclusion or omission would influence or change the decision made by users of the financial statements. |
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Term
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Definition
| When in doubt, choose the the solution that will be least likely to overstate assets and income. |
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Term
| FASB Accounting Standard of Codification (ASC) |
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Definition
| The single source of US GAAP for nongovernmental agencies effective July 1, 2009; replaced all previously issued non-SEC accounting literature; did not change GAAP, but merely restructured the existing accounting standards to provide one cohesive set of accounting standards; includes GAAP & relevant literature issued by the SEC; FASB issues updates (ASUs). |
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Term
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Definition
1. Transaction JEs - Journal
2. Transaction JEs - GL
3. Unadjusted TB
4. AJEs - Journal
5. AJEs - GL
6. Adjusted TB
7. FS w/ Footnotes (GAAP)
8. Closing AJEs - Journal
9. Closing AJEs - GL
10. Post-Closing TB
11. Optional - Reversing JEs |
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