FAR Exam

Budgetary Fund Balance

- Account that is credited when estimated revenues and transfers-in for the year are greater than appropriations and transfers-out for the year - Debited when reverse is true

Allowance Method

- Accounting for bad debts - An estimate is made of the accounts receivable that will be written off and that amount is charged to bad debt expense for that period - GAAP - Matches bad debt expense to the sales revenue that generated it

Accumulated Benefit Obligation

- Actuarial present value of pension benefits attributed by a formula based on current and past compensation levels - Includes no assumptions about future compensation levels and uses current salaries

Amortization

- Allocation of the cost of an asset over its useful life - Fixed assets is depreciation and wasting assets is depletion

Consistency

- Allows comparability - Policies and procedures must be applied consistently period to period - Any changes must be accounted for and disclosed in the financial statements

Bad Debt Expense

- Amount charged to income for the period for bad debts - Doubtful accounts expense

Account Analysis Format

- Analysis format for any balance sheet account - Beginning balance + something - something = ending balance

Annuity Due

- Annuity in advance - Payments at beginning of the period

Commodity-Backed Bond

- Asset-linked bond - Redeemable either in cash or stated volume of commodity (whichever is greater)

Common Stock

- Basic ownership interest in a corporation - Shareholders bear the ultimate risk of loss and receive ultimate benefits of success, but are not guaranteed dividends or assets upon dissolution - Control management - Right to vote, right to share in earnings of the corporation, preemptive right to proportionate share of any additional common stock issued, and right to share in assets upon liquidation after satisfaction of creditor claims and those of preferred shareholders

Comprehensive Income

- Change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non owner sources - Includes all changes in equity except those resulting from investments by owners and distributions to owners

Accumulated Other Comprehensive Income

- Component of equity that includes the total OCI for current period and previous periods - Comprehensive income for the current year is "closed" to this account - Parallel to retained earnings for items of OCI

Blended Presentation

- Component units - Combines financial information with primary government - Financial information not presented in separate columns

Control

- Consolidation purposes - More than 50% of the voting stock acquired - Parent status

Convertible Bond

- Convertible into common stock of the debtor at the option of the bondholder - Must be surrendered to obtain the stock

Board-Designated Endowment Fund

- Created by not-for-profit entity's governing board by designating a portion of its net assets without donor restrictions to be invested to provide income for a long but not necessarily specified period - Funds functioning as an endowment - Quasi-endowment funds

Component Depreciation

- Depreciation of individual identifiable pieces of a fixed asset - Required under IFRS

Asset Group

- Discontinued operations reporting - Collection of assets to be disposed of together as a group in a single (disposal) transaction and the liabilities directly associated with those assets that will be transferred in that same transaction

Component of an Entity

- Discontinued operations reporting - Part of an entity (lowest level) for which operations and cash flows can be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the entity - May be an operating segment, a reportable segment, a reporting unit, a subsidiary, or an asset group

Cash Discount

- Discount for early payment, generally based on percentage of sales price - Sales may be recorded on gross basis or net basis

Contingent Shares

- Do not require cash consideration and depend on some future event or on certain conditions being met - Those that are dilutive are included in the calculation of basic EPS if all conditions for issuance are met

Antidilution

- EPS calculations - Increases EPS - Results should not be used

Budgetary Accounts

- Estimated accounts that are the opposite (in terms of natural debits and credits) from real or actual accounts - Normally posted only twice a year (BAE-BAE)

Appropriations

- Estimated expenditures - The budgetary account that is credited at the beginning of the year

Concentration of Credit Risk

- Exists if a number of counterparts are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions - Disclosed

Cash Flow Hedge

- Financial instrument designated as hedging exposure to variability in expected future cash flows attributed to a particular risk - Gains/losses on effective portion are deferred and reported as a component of OCI until cash flows are realized - Gains/losses on ineffective portion are reported in current income

Additions

- Fixed asset accounting - Increase quantity or improve quality of fixed assets and are capitalized

Committed Fund Balance

- Fund balance resources associated with assets obligated by a formal action of the government's highest decision-making authority - Encumbered appropriations are not displayed here

Additional Paid-In Capital

- Generally contributed capital in excess of par or stated value - Can also arise from many different transactions - Examples include sale of treasury stock at a "gain", issuance of liquidating dividends, conversion of bonds, and declaration of a small stock dividend - May be aggregated and shown as one amount on balance sheet

Business-Type Activities

- Governmental accounting - Normally financed by fees

Consumption Method

- Governmental fund expenditures - Supplies and prepaid amounts and inventory are booked into a current asset account when purchase is made - Any amount on hand at the end of the period is removed from current asset account and treated as an expenditure - Must be a reservation of fund balance for amount in current asset account

Basic Financial Statements

- Governmental organizations - Government-wide financial statements, fund financial statements, and notes to the financial statements

Capital and Related Financing Activities

- Governmental organizations - One of four cash flows categories - Includes capital asset purchases

Cash

- Includes both currency and demand or similar deposits with banks and/or either financial institutions - May be restricted for some special purpose or unrestricted

Construction Period Interest

- Interest incurred during the construction period for a fixed asset or special order goods - Capitalized during specified period

Comprehensive Allocation

- Interperiod tax allocation is applied to all temporary differences - Liability method requires that either income taxes payable or a deferred tax liability (asset) be recorded for all tax consequences of the current period

Capital Stock

- Legal capital - Amount of capital that must be retained by a corporation for the protection of creditors - Par or stated value of preferred and common stock

Contributions With Donor Restrictions

- Limit use of contributed assets - Recognized as revenues, gains, and other support in the period received as assets, decreases of liabilities, or expenses depending on the form of benefits received - Donor-restricted support

Change in Accounting Principle

- May be changed only if the alternative is preferable and more fairly presents the information - Normally reported using the cumulative effect approach - Reported retrospectively as a change to opening balance of retained earnings if cumulative effect can be determined - Net of tax

Complex Capital Structure

- Not simple - Entity has securities that can potentially be converted to common stock and would dilute EPS

Authorized Shares

- Number of shares of common stock that are authorized for a corporation to issue - Disclosed

Change in Accounting Estimate

- Occurs when it is determined that an estimate previously used was incorrect - Reported prospectively in current period and future periods if change affects both

Accounts Receivable

- Oral promises to pay debts - Classified as current assets and either trade receivables or non trade receivables

Capitalization of Interest Period

- Period that construction period interest is capitalized - Begins when expenditures for the asset have been made, activities necessary to get asset ready for its intended use are in progress, and interest costs are being incurred - Ends when asset is substantially complete and ready for its intended use

Appropriated Retained Earnings

- Portion of retained earnings that has been disunited for some purpose - Means of disclosure - Restrict the dividends that can be declared

Cash Dividend

- Pro rata distribution by a corporation based on shares of a particular class of stock and usually represents a distribution of earnings - Most common type of dividend - Only paid on authorized, issued, and outstanding shares - NOT paid on treasury stock

Assets

- Probable future economic benefits to be received as a result of past transactions or events - Valuation accounts may be used to show reductions to or increases in an asset that reflect adjustments beyond the historical cost or carrying amount of the asset

Composite Depreciation

- Process of averaging the economic lives of a number of dissimilar property units and depreciating the entire class of assets over a single life - Simplifies record keeping of assets and depreciation calculations - No gain/loss recognized when one asset of the group is sold or retired

Accounting Alternative

- Provided in Accounting Standards Updates (ASUs) issued by Financial Accounting Standards Board (FASB) starting in 2014 - For some or all private companies - Reflect decisions reached by Private Company Council (PCC) and endorsed by FASB

Accounting Principles Board (APB) Opinions

- Published by APB from 1959 to 1973 - Those not superseded are included in the FASB Accounting Standards Codification

Accounting Research Bulletins (ARB)

- Published by the AICPA's Committee on Accounting Procedure from 1939 to 1959 - Those that were not superseded are incorporated in the FASB Accounting Standards Codification

Basket Purchase

- Purchase of two or more assets for a single price - Price must be allocated to individual assets purchased

Comparability

- Quality of information that enables financial statement users to identify similarities in and differences between two sets of economic phenomena - Allows users to compare the information with similar information for other business enterprises

Character Classification

- Refers to determining the basis of the fiscal period the expenditures are presumed to benefit - Major ones are current expenditures, capital outlay, debt service, and inter-governmental

Consolidated Financial Statements

- Represent the results of operations, cash flows, and financial position of a single entity, even if multiple legal entities are involved - More meaningful than parent company financial statements and/or parent company financial statements together with separate subsidiary financial statements

Accrual Accounting

- Required by U.S. GAAP & IFRS - Revenues are recognized when performance obligation is satisfied and expenses are recognized in the same period as related revenue, not necessarily in the period in which the cash is received or expended by the company

Consigned Goods

- Seller (consignor) delivers goods to agent (consignee) to hold and sell on seller's behalf - Consignor includes goods in its inventory because title and risk of loss is retained by the consignor even though the consignee possess the goods

Basic Earnings per Share

- Simple capital structure - Income available to common shareholders divided by the weighted average number of common shares outstanding

Activity Classification

- The classification of governmental expenditures by specific activity - Can be an event, a task, or a unit of work with a specific purpose

Consolidation

- The combination of the financial statements of two or more entities into a single set of financial statements representing a single economic unit - Cost method, equity method, or consolidation depending on level of control

Accumulated Depreciation

- The depreciation accumulated to date for fixed assets - Contra-asset to fixed assets

Accretion Expense

- The increase in ARO liability due to the passage of time calculated using appropriate accretion rate - Added to ARO liability each period

Actual Return on Plan Assets

- The return on the assets held by a pension plan - Can be calculated based on the fair value of plan assets at the beginning and end of the period, adjusted for employer contributions and benefit payments

Cash-Generating Unit

- The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets/groups of assets - Under IFRS, goodwill impairment is analyzed at this level

Bond Selling Price

- The sum of the present value of the future principal amount plus the total present value of the future interest amounts, all discounted at the prevailing effective interest rate - Bond may sell at a premium or a discount

Available-for-Sale Debt Securities

- Those not meeting the definitions of other classifications (trading or held-to-maturity) - Reported as either current or non-current assets, depending on intent

Bond Issuance Costs

- Transaction costs of a bond issue - Under U.S. GAAP and IFRS, decrease the carrying value of the bond and are amortized using effective interest method - Examples include legal fees, accounting fees, underwriting commissions, and printing

Conditional Promise

- Transaction that depends on an occurrence of a future and uncertain event - Recognition does not occur until the conditions are substantially met and promise becomes unconditional - Good fait deposits that accompany these are accounted for as a refundable advance in the liability section

Contributions Without Donor Restrictions

- Unconditional promise to contribute in the future reported as restricted support at the present value of estimated future cash flows using a discount rate commensurate with the risks involved - If expected to be collected and paid in less than one year, may be measured at net realizable value

Computer Software Developed for Internal Use

- Under U.S. GAAP, costs of a computer software to be sold, leased, or licensed are separated into categories - Costs incurred after technological feasibility has been established are capitalized and amortized - Costs incurred to actually produce the software are inventoried

Completed Contract Accounting

- Under U.S. GAAP, method used to account for long-term construction contracts when contract costs cannot be reasonably estimated - Income recognized only upon completion of the contract

Budgetary Accounting

- Used to control expenditures and to account for the levy of taxes sufficient to cover estimated expenditures - Use budgetary accounts and encumbrances (BAE-BAE)

Acquisition Method

- Used under U.S. GAAP and IFRS to account for the acquisition of a subsidiary - Acquirer recognizes all acquired assets and liabilities and any non controlling interest at fair value

Asset Retirement Obligation (ARO)

A legal obligation associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, or development and/or normal operation of a long-lived asset, except for certain lease obligations

Contribution

An unconditional transfer of cash or assets to a new owner in a manner that is voluntary and nonreciprocal

Conventional Retail Inventory Method

Approximates the results that would be obtained by taking a physical inventory count and pricing the goods at the lower of cost or market

Compensated Absences

Accrued if all criteria are met: (1) Employee has performed the services to which the vacation or sick pay is attributable (2) Liability is vested or accumulated (3) Payment is probable (4) Amount can be reasonably estimated

Business (as used in discontinued operations)

An integrated set of activities and assets that is conducted and managed for the purpose of providing a return to investors or other owners, members, or participants

Cash Conversion Cycle

Days in inventory plus days sales in accounts receivable minus days of payables outstanding

Bond Indenture

Describes the contract between issuer and bondholders

Contingency

Existing condition, situation, or set of circumstances involving varying degrees of uncertainty that may result in the increase or decrease in an asset or the incurrence or avoidance of a liability

Accrued Liability

Expense recognized or incurred but not yet paid

Contributory Plan

Plan to which employees are required to contribute

Accumulated Postretirement Benefit Obligation (APBO)

Present value of future post retirement benefits that have vested as of the measurement date

Accrued Expense

Recognized or incurred through the passage of time but not yet paid by the entity

Change in Accounting Entity

Occurs when entity being reported has changed composition

Collateral Trust Bond

Bond that is secured by financial assets like stocks or bonds

Agency Transaction

Consists of resources received by a not-for-profit organization over which the organization has little or no discretion or variance power

Assigned Fund Balance

Fund balance resources associated with assets the government intends to obligate but has not formally committed

Call Option

Gives the holder the right to buy from the option writer at a specified price during a specified period of time

Capital Grants

Grants for capital expenditures

Comprehensive Annual Financial Report (CAFR)

Includes basic financial statements and required supplementary information, an introductory section, and a statistical section

Cash Equivalents

Includes cash and short-term, highly liquid investments that are both readily convertible to cash and so near their maturity when acquired (90 days or less from date of purchase) that they present insignificant risk of changes in value

Compensatory Stock Option Plan

Intended to compensate employees

Capital Grants and Contributions

Mandatory and voluntary non-exchange transactions with other governments, organizations, or individuals that are restricted for use in a particular program for capital expenditures

Asset Turnover

Net sales divided by average total assets

Accounts Receivable Turnover

Sales (net) divided by average accounts receivable (net)

Capital Projects Fund

Set up to account for resources used for the acquisition or construction of major capital assets by a governmental unit, except those financed by an enterprise fund

Book Value per Common Share

The amount common shareholders would receive for each share of common stock if all assets were sold at their book (carrying) values and all creditors were paid

Conservatism Principle

The method that is least likely to overstate assets (and revenues/gains) and understate liabilities (and expenses/losses) in the current period is selected