FAR SU1
According to the FASB's conceptual framework, what are the measurement attributes for assets and liabilities?
1) Historical cost is the amount of cash paid to acquire an asset. It ordinarily is adjusted subsequently for amortization (which includes depreciation) or other allocations. It is the relevant measurement attribute for property, plant and equipment. 2) Current (replacement) cost is the amount of cash that would have to be paid for a current acquisition of the same or an equivalent asset. It may be used to measure LIFO and retail method inventories. 3) Current market value is the amount of cash expected to be received for an asset in the due course of business, minues the cost of completion and sale. It is used to measure some inventories. a) Net settlement value is the relevant attribute for trade payables. It is the sum of the undiscounted amount of cash expected to be paid to liquidate an obligation in the ordinary course of business. 4) Present value of future cash flows incorporates time value of money concepts. a) Calculating the PV of future cash flows requires (a) identifying an appropriate interest rate (or discount rate) and (b) identifying the timing and amount of future cash flows. It may be used to measure noncurrent receivables and payables.
What are the characteristics of the govermental reporting envirornment?
1) The representative form of goverment and the seperation of powers 2) National, state, county, and city goverments and the interflow of revenues 3) The expectations of taxpayers bout the services they receive 4) A budget as a policy decision and a legally binding control 5) Use of fund accounting 6) Goverments at the same level with dissimiliar functions. 7) Assets, e.g., highways and bridges that do not earn revenue 8) Citizens who want the maximum services for the minimum taxes
What are the objectives of financial reporting by nongovernmental not-for-profit entities?
1) Useful to providers in making resources allocation decisions. 2) Useful in assessing services and the ability to provide services. 3) Useful in assessing management stewardship and performance 4) About economic resources, obligations, net resources, and changes in them, including a) Performance of an organization during a period b) Nature of, and relationship between, resource inflows and outflows c) Service efforts and accomplishments d) Factors that may affect an organization's liquidity, such as i) Sources and users of cash and other liquid assets and ii) Borrowing and repayment activities 5) About managers explanations and interpertations to help users understand financial information
The FASB makes changes to the Accounting Standards Codification by issuing.
An Accounting Standards update (ASU) is issued when the FASB approves an amendment to the Accounting Standards Codification (ASC). However, an ASU is not authoritative until it has been incorporated into the ASC. The ASC is the single source of U.S GAAP
According to the FASB's conceptual framework, asset valuation accounts (contra accounts) are
Asset valuation accounts are seperate items sometimes found in financial statements that reduce or increase the carrying amount of an asset. The conceptual framework considers asset valuation accounts to be part of the related asset account. They are not considered to be assets or liabilities in their own right.
According to the FASB's conceptual framework, what are the essential characteristics of an asset?
Assets are probable future economic benefits obtained or controlled by an entity as a result of a past transaction or event. One of the three essential characteristics of an asset is that the transaction or event giving rise to the entity's right to or control of its assets has already occured. It is not expected to occur in the futre. A second essential characteristic of an asset is that an entity can obtain the benefits of and control others' access to the asset. The third essential characteristic is that an asset much embody a probable future benefit that involves a capacity to contribute to future net cash inflows.
According to the FASB's conceptual framework, which of the following enhances information that is relevant and faithfully represented?
Comparability is a qualitative characteristic that enhances the usefulness of relevant and faithfully represented information. It enables users to identify similarities in and differences among items.
According to the FASB's conceptual framework, what decreases shareholder equity?
Equity equals assets mimus liabilities. Accordingly, transactions that decrease equity. Distributions to owners, such as payments of dividends (debit retained earnings and credit dividends payable, then debit dividends payable and credit cash), are such transactions.
Some costs cannot be directly related to particular revenues but are incurred to obtain benefits that are exhausted in the period in which the costs are incurred. An example of such a cost is
Expenses should be recognized when a benefit has been consumed. The consumption of benefit may occur when (1) the expenses are matched with the revenues, (2) they are allocated on a systematic and rational basis to the periods in which the related assets are expected to provide benefits, or (3) the cash is spent or liabilties are incurred for goods and services that are used up either simultaneously with the acquisition or soon after. An example of a cost that (1) cannot be directly related to particular revenues but (2) is incurred to obtain benefits that are exhausted in the same period in which the cost is incurred is salespersons monthly salaries.
According to the FASB's conceptual framework, what does the concept of faitful representation in financial reporting include?
Faithful reprensentation and relevance are the fundemental qualitative characteristics of accounting information. A perfectly faithful representation is complete, neutral, and free from error. Faithfully represented information is neutral if it is unbiased in its selection or presentation of information.
What is required to be reported to the United States Securities and Exchange Commission on Form 8-K?
Form 8-K is a current report to disclose material events. (a) It must be filed within 4 business days after the material event occurs. (b) The following are some examples of material events: i) A change in control of the registrant ii) Acquisiton or disposition of a significant amount of assets not in the ordinary course of business iii) Bankruptcy or receivership iv) Resignation of a director v) A change in the registrant's certifying accountant
U.S Securities and Exchange Commission (SEC) regulations for the financial statement presentation and disclosure requirements of SEC filings can be found in
Regulation S-X applies to the reporting of financial statement, including notes and schedules.
According to Statements of Financial Accounting Concepts, predictive value relates to
Relevance is a general idea that is a fundamental qualitative characteristics of useful financial information. It is the capacity of information to make a difference in a decision. It must have (1) predictive value, (2) confirmatory value, or both. Moreover, materiality is a related concept that is entity-specific.
According to the FASB's conceptual framework, certain assets are reported in finacial statements at the amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently. What is the name of the reporting concept?
Replacement (current) cost is the amount of cash that would have to be paid for a current acquistion of the same or an equivalent asset.
Which of the following accounting pronouncements are the most authorative?
The FASB's Accounting Standard Codification is the single source of U.S GAAP. All other sources of guidance are nonauthorative
The management discussion and analysis (MD&A) section of an annual report
The MD&A section is included in SEC filings. It addresses in a nonquantified manner the prospects of a filer. The SEC examines it to determine that management has disclosed material information affecting future results. Disclosures about commitments and events that may affect operations or liquidity are mandatory. Thus, the MD&A section pertains to liquidity, capital resources, and results of operations.
Under SFAC No. 6, Elements of Financial Statements, interrelated elements of financial statements include
The elements of financial statements directly related to measuring the performance and status of business enterprises and nonbusiness organizations are (1) assets, (2) liabilities, (3) equity of a business or net assets of a nonbusiness organization, (4) revenues, (5) expenses, (6) gains, and (7) losses. The elements of (1) investments by owners, (2) distributions to owners, and (3) comprehensive income relate only to business enterprises. Information disclosed in notes or parenthetically on the face of financial statements amplifies or explains information recognized in the financial statements.
A company has beginning net assets of $100,000 and ending net assets of $95,000. During the year, additional capital stock was sold for $8,000, and dividends of $3,000 were declared. Using the capital maintenance approach, the net income (loss) for the year is calculated as
The financial capital maintenance approach requires that comprehensive income be determined by finding the change in equity (net assets) after adjusting for investments by, and distributions to, owners. However, this approach does not provide the detail of the transaction approach to income determination under which each component of income is measured and reported. Change in net assets $ (5,000) Capital stock sold (8,000) Dividends declared 3,000 Total $(10,000)
General purpose external financial reporting of a corporation focuses primarily on the needs of which of the following users?
The objective is to report financial information that is useful in making decisions about providing resources to the reporting entity. Primary users of financial information are current and potential investors and creditors who cannot obtain it directly.
What is the primary objective of financial reporting?
The overall objective is to report financial information that is useful to current and potential investors and creditors in making decisions about providing resources to an individual reporting entity.
The reporting model described in the guidance on not-for-profit financial statements applies to
The reporting model for not-for-profit financial statements applies to nongovernmental not-for-profit entities (NFPs). The information needs of resources providers of NFPs differ from those of resource providers of business entities. Resource providers of business entities primarily need information about financial return. Resource providers of NFPs primarily need information about the services provided by the NFP and its continuing ability to provide those services.
Under SFAC 8, the ability, through consensus among measurers, to ensure that information represents what it purports to represent is an example of the concept of
Verifiability is a qualitative characteristic that enhances relevance and faithful representation. Information is verifiable (directly or indirectly) if knowledgeable and independent observers can reach a consensus (not necessarily unanimity) that it is faithfully reprensented.