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Financial 1 CPA 2011
CPA review for FARE 2011 Financial 1
46
Accounting
Not Applicable
09/04/2011

Additional Accounting Flashcards

 


 

Cards

Term

Securities & Exchange Committee

Definition

-established by Securities & Exchange Act of 1934

-all issuers are subject to SEC

-legal authority to establish GAAP

-issued: Regulation S-X, Financial Reporting Releases (FRR), Accounting Series Releases (ASR), Interpretive release (IR), Staff Accounting Bulletins (SAB), and EITF Topic D and SEC Observer comments

Term
Committe on Accounting Procedure
Definition

-CAP part-time committee of AICPA

-promulgated Accounting Research Bulletings (ARB)

-determined GAAP from 1939 - 1959

Term
Accounting Principles Board
Definition

-APB part-time committee of AICPA

-issued Accounting Principles Board Opinions (APBO) and APB Interpretations

-determined GAAP from 1959 - 1973

Term
Financial Accounting Standards Board
Definition

-FASB independent full time organization established in 1973

-issued Statements of Financial Accounting Standards (SFAS), FASB Interpretations (FIN), FASB Technical Bulletins (FTB), Emerging Issues Task Force Statements (EITF), FASB Staff Positions, FASB Implementation Guides and Statements of Financial Accounting Concepts (SFAC)

-7 full time members serve 5 year terms and may be reappointed for 1 additional term, must sever all ties with businesses

Term
FASB Accounting Standards Codification
Definition

-effective 07/01/09

-single source of authoritative nongovernmental US GAAP

-include following literature: FASB SFAS, Interpretations, Technical Bulletins, Staff Positions, Staff Implementations Guides, Statement No. 138; EITF Abstracts & Topic D; Derivative Implementation Group Issues; APBO; ARB; Accounting Interpretations; AICPA Statement of Position, Auditing & Accounting Guides, Practice Bulletins, Technical Inquiry Service; SEC S-X, FRR, ASR, IR, SAB & EITF Topic D

Term
International Accounting Standards Board
Definition

-IASB established in 2001 as part of International Accounting Standards Committee (IASC) foundation

-purpose is to develop a single set of high quality global accounting standards

-12 full time members 2 part time members

-issues International Financial Reporting Standards (IFRS)

Term
Statement of Financial Accounting Concept No. 8
Definition

-replaced SFAC No. 1 & 2

-Chapter 1: Objective of General Purpose FInancial Reporting

-Chapter 3: Qualitative Characteristics of Useful Financial Information

Term
Fundamental Qualitative Characteristics
Definition

-Relevance: Predictive value, Materiality, Confirming Value

-Faithful Representation: Freedom of error, Completeness, Neutrality

Term
Enhancing Qualitative Characteristics
Definition

-Comparability

-Understandability

-Timeliness

-Verifiability

Term
The Cost Constraint
Definition
-the benefits of reporting financial information must be greater than the costs of obtaining and presenting the information
Term
Conservatism Principle
Definition

-recognize revenues/gains when the earnings process is complete or virtually complete

-recognize expenses/losses immediately

Term
Statement of Financial Accounting Concept No. 7
Definition

-Using Cash Flow Information and Present Value in Accounting Measurements (more objective than I/S)

-only applies to measurement issues for assets and liabilities that are determined using future cash flows only

Term
Elements of Present Value Measurement
Definition

-estimate of future cash flow

-expectations about timing variations of future cash flows

-time value of money (risk-free rate of interest)

-the price for bearing uncertainty

-other factors (liquidity issues & market imperfactions)

Term
Income Statement
Definition

-performance for period of time

-purpose is to provide information about the uses of funds in the income process (expenses), the uses of funds that will never be used to earn income (losses), the sources of funds created by those expenses (revenues), and the sources of funds not associated with the earnings process (gains)

-useful in determining profitability, value for investment purposes, and credit worthiness

Term
Major Components of an Income and Retained Earnings Statement
Definition

-IDE (I/S) A (R/E)

-Income (loss) from continuing operations

-income (loss) from Discontinued operations

-Extraordinary items

-Accounting principle change cumulative effect

Term
Income from Continuing Operations
Definition

-I of IDEA

-includes: operating activites, non-operating activites and income taxes

Term
Income from Discontinued Operations
Definition

-D of IDEA

-includes: impairment loss, G/L from actual operations from component, & G/L on disposal of component

-included in the period incurred

-net of tax

Term
Extraordinary Items
Definition

-E of IDEA

-material, unusual & infrequent

-natural disasters may or may not qualify

- examples: expropriation of plant by the government; prohibition of a product line by newly enacted law/regulation; certain unusual & infrequent G/L from extinguishment of debt

Term
Accocunting Changes & Error Correction
Definition

-A of IDEA

-include: changes in estimate (prospective); changes in accounting principles (retrospective); changes in accounting entity (restate)

Term
Comprehensive Income
Definition

-non-owner transactions

-includes all changes in equity during a period except those resulting from investments by owners and distributions to owners

= Net Income + Other Comprehensive Income

Term
Net Income
Definition

- Income from continuing operations

- Discontinued operations

- Extraordinary Items

Term
Other Comprehensive Income
Definition

-direct to equity

-P: pension adjustments

-U: unrealized G/L (available fos sale securities)

-F: foreign currency items

-E: effective portion cash flow hedges

-R: revaluation surplus (IFRS only)

Term
Single Statement Approach
Definition
displays other comprehensive income below the income statement and totals them for comprehensive income (start with revenue)
Term
Two-Statement Approach
Definition
displays comprehensive incomeas a separate statement that begins with net income (Statment of Comprehensive Income)
Term
Comprehensive Income Reported as Component within the Statement of Owners' Equity
Definition

-prohibited by IFRS

-comprehensive income may be displayed as a separate column in the statement of owners' equity

Term
Summary of Significant Accounting Policies
Definition

-integral part of F/S as 1st or 2nd note required by IFRS & GAAP

-identifies/deacribes: measurement bases; accounting principles/methods; criteria; policies; pricing

-common policies included: basis of consolidation; depreciation methods; amortization of intangibles; inventory pricing

-items not included: composition & amounts of accounts; details of changes in accounting principles; dates of maturiy & amounts; yearly computation of depreciation/amortization/depletion

Term
Notes to Financial Statements
Definition

-changes in stockholders' equity

-required marketable securities disclosure

-contingency losses

-contractual obligations (including restrictions on specific assets/liabilities)

- pension plan description

Term
Interim Financial Reporting
Definition

-not required by GAAP or IFRS

-generally concerned with quarterly reports

-match revenues and expenses by quarter

-timeliness is emphasized over reliabilty

-viewed as integral part of financial statements

Term
Segment Reporting
Definition

-objective is to provide information on the business activities and the economic environment of a company to help users of the financial statements: better understand performance; better assess prospects for future net cash flows; and make more informed judgments about the enterprise as a whole

-use same accounting principles as main F/S

-no elimination of intercompany transactions

Term
Operating Segments
Definition

-component that engages in business activities from which it may earn revenues and incure expenses

-results are regularly reviewed by cheif operating decision maker

-discrete financial information is available

-corporate headquarters and pension plan not considered operating segments

Term
Reportable Segments
Definition

-10%: revenue, profit/loss, or assets

-75%: additional operating segments need to be identified as reportable segments until 75% of external revenue is included in reportable segments

Term
Segment Profit/Loss
Definition

Revenues (for that segment)

less: directly traceable costs

less: allocated costs (by the CFO)

=operating profit/loss (for that segment EBIT)

 

excludes: general corporate revenues/expenses, interest expense, income taxes, extraordinary items, G/L from discontinued operations

Term
Development Stage Enterprise
Definition

-principal operations have not commenced

-principal operations have generated insignificant amount of revenue

-start up, organizational costs are expensed immediately under GAAP

Term
Fair Value
Definition

-price to sell an asset or transfer a liabilty in an orderly transaction between market participants at the measurement date

-use principal market: market with greatest volume

-if no principal market, use most advantageous market: market with best price after considering transaction costs

Term
Fair Value Measurement Techniques
Definition

-market approach: uses prices from market transactions involving identical/comparable assets/liabilities

-income approach: converts future amounts to a single discounted amount

-cost approach: uses current replacement cost

Term
Fair Value Heirarchy of Inputs
Definition

-level 1: most relieable, quited prices in active markets of identical assets/liabilities

-level 2: other than quoted market prices that are directly or indirectly observable for the asset/liabilty

-level 3: management estimates, unobservable inputs for asset/liability

Term
First-Time Adoption of IFRS
Definition

-requires at least 3 B/S and 2 of each of all other F/S

-date of transition is date of opening B/S (beginning of prior period)

-use same accounting policies in its opening IFRS B/S & in all periods presented in the first IFRS F/S

-entity should disclose how the transition affected the F/S (use reconciliations of equity and comprehensive income)

Term
Securities Offering Registration Statement
Definition

-required by SEC when a company issues new securities

-includes: disclosures about securities; relationship of new securities to old securities; audited F/S; description of business risk

Term
Form 10-K
Definition

-filed annualy by issuers

-deadline is 60 days after fiscal year end for large accelerated filers, 75 days for accelerated filers, and 90 days for all other filers

-contains: financial disclosures, summary of financial data, MD&A, and audited F/S

Term
Form 10-Q
Definition

-filed quarterly by issuers

-deadline is 40 days after fiscal quarter end for laarge accelerated and accelerated filers, and 45 days for all others

-contains: unaudited F/S, interim MD&A, & certain disclosures

Term
Form 11-K
Definition
annual report of a company's employee benefit plan
Term
Form 20-F & 40-F
Definition

-filed annually by foreign private issuers

-40: Canadian companies registered with SEC

-20: other non- US registrants

-similar to 10-K

-contain: financial disclosures, summary of financial data, MD&A, and audited F/S (using GAAP/IFRS/or other with a reconciliation to GAAP)

Term
Form 6-K
Definition

-semi-annually by foreign private issuers

-similar to 10-Q

-contains: unaudited F/S, MD&A, and certain disclosures

Term
Form 8-K
Definition
filed to report major corporate events outside the ordinary course of business
Term
Forms 3, 4, & 5
Definition
filed by directors, officers, or beneficial owners of more than 10 % of a class of equity securities of an issuer
Term
Regulation S-X
Definition

-form & content of and requirements for interim and annual F/S to be filed with the SEC

-interim: condensed F/S are allowed; may omit summary of significant policies

-annual: must be audited and include BS of 2 most recent years and 3 years of all others

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