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Details

FAR-1 Conceptual Framework & IFRS
Roger CPA Review 2012, FAR
56
Accounting
Professional
07/31/2012

Additional Accounting Flashcards

 


 

Cards

Term
GAAP Primary Qualitative Characteristics
Definition
-Must be USEFUL
-Must have Relevance & Faithful Representation
Term
GAAP Relevance
Definition
Roger is PC
RELEVANCE
+Predictive
+Confirmatory
--Materiality
Term
GAAP Faithful Representation
Definition
FENCe
FAITHFUL REPRESENTATION
+(Free from) Error
+Neutrality
+Completeness
Term
GAAP Enhancing Qualitative Characteristics
Definition
Relevance & Faithful Representation
CUT like V
+Comparability (Consistency)
+Understandability
+Timeliness
+Verifiability
Term
GAAP Constraint - Primary Qualitative Characteristics
Definition
Cost/benefit
Term
GAAP Comprehensive Income
Definition
All changes in equity other than "owner" sources.
DENT
+Derivative Cash Flow Hedge
+Excess adjustment of Pension PBO and FV of plan assets at year-end
+Net unrealized gains or losses on available-for-sale securities
+Translation adjustments for foreign currency
Term
Physical Capital Maintenance Concept
Definition
Only recognize an event when an asset is sold or a liability is settled
- Current accounting methods emphasize this concept for fixed assets
Term
Financial Capital Maintenance Concept
Definition
recognize an event as a change in the value of an asset or liability occurs
- Current accounting methods emphasize this concept for marketable securities
Term
GAAP Comprehensive income elements
Definition
REV, EXP, Gains, Losses
Term
When recognize an element?
Definition
+Meets definition of an element (asset, liability)
+Element is capable of being measured in monetary terms
+The item is useful (Relevant & Faithful Representation)
Term
Historical Cost
Definition
Amount you paid for it (PP&E)
Term
Replacement Cost
Definition
What it would cost to replace an item (inventory)
Term
FMV (Fair Market Value)
Definition
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
Term
NRV (Net Realizable Value)
Definition
Amount expected to be converted into (A/R)
Term
PV (Present Value)
Definition
Discounted cash flows due to the time value of money (Notes/Receivable, Bonds/Payable, Leases)
Term
Fair Value: Fair value option for reporting
Definition
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date at exit price
+An orderly transaction is a transaction that allows for normal marketing activities that are usual and customary (Not Forced transaction)
=Exit price (Not Entry price)
Term
Fair Value: Applying FV measurement approach
Definition
1) Identify ASS or LIAB
2) Determine principle or most advantageous market
3) Determine the valuation premise
4) Determine appropriate valuation technique
5)Levels - Obtain inputs for valuation
6) Calculate FV of asset
Term
Fair Value: Principle Market
Definition
Greatest Volume and level of activity occurs
Term
Fair Value: Most advantageous market
Definition
Maximizes price received for the asset or minimizes amount paid to transfer the liability
Term
Fair Value: Valuation premise
Definition
Assume the highest and best use premise to determine the fair value
+in-use - if maximizes value by using it with other assets as a group
+in exchange - if asset provides maximum value on a stand-alone basis
Term
Fair Value: Market approach
Definition
uses prices and relevant information from market transactions for identical or comparable ASS/LIAB
Term
Fair Value: Income approach
Definition
uses PV techniques to discount cash flows or earnings
Term
Fair Value: Cost approach
Definition
uses current replacement cost - change in method is considered a change in accounting estimate
Term
Fair Value: Hierarchy
Definition
must be used to prioritize the inputs to valuation techniques
Term
Fair Value: Hierarchy: Level 1
Definition
quoted prices from active markets
Term
Fair Value: Hierarchy: Level 2
Definition
direct/ indirect observable inputs
(yield curves, bank prime rates, interest rates, credit risks, default rates on loans)
Term
Fair Value: Hierarchy: Level 3
Definition
unobservable inputs if level 1 or 2 are not available
(financial forecasts or expected cash flow estimates)
Term
Fair Value Option Applies to
Definition
+ Availible-for-sale
+ Held-to-Maturity
+ Equity Method
+ Certain financial LIAB, firm commitments that involve financial instruments, written loan commitments, non-financial insurance contracts settled by 3rd-party, warranties for 3rd party, host financial instrument, ect.
Term
Company elects to measure the asset or liability
Definition
+ At the date the item is first recognized
+ election is irrevocable
+ made on instrument-by-instrument basis
+ report unrealized gains and losses in earnings on income statement
Term
Using cash flow info & PV in accounting measurements - The factors that must be considered
Definition
risk, timing, interest, amount of cash flows
Term
Cash flow info & PV: Risk
Definition
the probability that the cash will actually be paid or received
Term
Cash flow info & PV: Timing
Definition
the periods in which the payments are expected to be received
Term
Cash flow info & PV: Interest
Definition
the interest rates that would be appropriate for market rates and credit standing
Term
Cash flow info & PV: Amount of cash flows approaches
Definition
Amount of cash flows approachs (look at credit standing of entity)
+Traditional - use most likely cash flow
+Expected - use weighted avg. of different possibilities
Term
REV & EXP recognition: Earned
Definition
earnings process is complete
Term
REV & EXP recognition: Realizable
Definition
collect cash or a claim of cash
Term
REV is recognized when:
Definition
+Signed Contract
+Services rendered or delivery
+Fixed or determinable price
+Collection is reasonably assured
Term
EXP is recognized when:
Definition
+Economic benefit is consumed or asset uses future benefit
*EXP can be matched to REV (COGS)
*EXP can be matched to period (depreciation)
*EXP expensed as incurred (salaries of admin employees)
Term
Risk and uncertainties that require disclosures in financial statements
Definition
1) Nature of operations
2) Use and extent of estimates
3) Significant estimates and potential impact
4) Current Vulnerability b/c of:
*Customers, suppliers, lenders, grantors or contributors
*REV from products, services or fund-raising
*Available sources of materials/labor
*Market/Geography of entity's operations
Term
FASB ASC
Definition
Accounting Standards Codification
Single source of authoritative US GAAP
Term
Notes to the FS under GAAP
Definition
+Summary of significant accounting policies
+Summary of significant assumptions (for prospective FS)
+Other Notes
Term
IASB Framework: 4 principal qualitative characteristics
Definition
1) Relevance
2) Reliability
3) Understandability
4) Comparability (Corresponding information ins previous periods)
Term
IASB Relevance - attributes
Definition
The information must be useful
-Predictive value
-Confirmatory value
-Materiality
Term
IASB Reliability - characteristics
Definition
-Neutrality
-Faithful representation
-Substance over form
-Prudence
-Completeness
Term
IASB constraints
Definition
Timeliness
Benefit > Cost
Term
IASB Elements of FS
Definition
1)ASS
2)LIAB
3)LIAB
4)Equity
5)EXP
Term
IASB Asset
Definition
a resource controlled by the entity - a result of past events and from which economic benefits are expected to flow to the entity
Term
IASB Liability
Definition
an obligation - a result of past events and settlement of which is expected to result in an outflow from resources
Term
IASB Equity
Definition
residual interest in assets after deducting liabilities
Term
IASB Income
Definition
increases in economic benefits
*REV - ordinary activities like sales, interest, rent
*Gains
*GAAP = Net Income / IFRS = profit
Term
IASB Expenses
Definition
decreases in economic benefits
*EXP - ordinary activities
*Losses
Term
IASB Recognition
Definition
Recognition is:
+Probable
+Cost or Value can be measured
Term
IASB Bases of measurement
Definition
+Historical cost
+Current cost
+Realizable value
+Present Value
Term
IASB Current cost
Definition
Amount to acquire currently
Term
IASB Realizable value
Definition
Amount to sell asset in orderly disposal
Term
IASB PV
Definition
discounted cash flows
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