FAR Vocab

A ________ - __________ __________ fund is an endowment fund created by a not-for-profit entity's (NFP'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 (sometimes called "funds functioning as endowment" or "quasi-endowment funds"). In rare circumstances, a board-designated endowment fund also can include a portion of net assets with donor restrictions. For example, if an NFP is unable to spend donor-restricted contributions in the near term, then the board sometimes considers the long-term investment of these funds.

Board Designated Endowment

The __________ __________ _________ is one of two alternative GAAP methods of accounting for a conversion transaction (convertible preferred stock or bonds). It values the new security issued (usually common stock) at the carrying value (book value) of the old (converted) security. No gain or loss is recognized on the transaction. (Contrast to the market value method.)

Book Value Method

A __________ __________ is the distribution of cash to stockholders in proportion to the number of outstanding shares held. Accounting for dividends involves a disbursement (credit) from the cash account and a reduction (debit) to Retained Earnings. The entry to record would be: When declared: DR Retained Earnings xx CR Dividends Payable xx or DR Dividends Declared xx CR Dividends Payable xx When paid: DR Dividends Payable xx CR Cash xx If a corporation uses the temporary account Dividends Declared, it is closed to Retained Earnings at the end of the accounting year. A __________ __________ represents a return on investment to shareholders.

Cash Dividend

____________ __________ is the increase in an asset retirement obligation that accrues as an operating expense.

Accretion Expense

_________ _________ refers to the net income on the income statement. This net income is computed using the accrual basis of accounting. Corporations are required to reconcile "___________ __________" to "taxable income" as a part of their annual federal income tax return. The taxable income will be different than __________ __________ because of the different rules for reporting income and deductions on the tax return.

Book Income

__________________ is the circular interrelation of financial statements, and the elements comprising them, such that statements that show elements describing levels or amounts at a moment in time depend on the information showing the effects of transactions, events, and circumstances during intervals of time in other statements, and vice versa (i.e., the statements show an algebraic relationship): Assets = Liabilities + Equity, and Balance at beginning of period + Changes during period = Balance at end of period The statement of income ties directly to the statement of financial position through the statement of retained earnings.

Articulation

A __________ is the lower limit of "market" in LCM pricing. It is the net realizable value reduced by an allowance for an approximately normal profit margin.

Floor

A ________ _________ (or a cash or deferred arrangement plan) is a retirement plan created by the employer and contributed to by the employee alone or with matching contributions from the employer. Under a ________ _________, an eligible employee may make a cash or deferred election with respect to contributions to, or accruals or other benefits under, a profit-sharing or stock bonus plan, a pre-Employee Retirement Income Security Act of 1974 (ERISA) money purchase plan, or a rural cooperative plan. Contributions to the plan are made pre-tax (tax-deferred) for income tax—not for Social Security, Medicare, or federal unemployment. Earnings, gains, or losses within the account are tax-deferred. Distributions from the account are fully taxable. Annual contributions are limited to an indexed amount. The act also allows an additional catch-up contribution to be made by taxpayers aged 50 and older.

401k Plan

A _________ ______________ is cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right (1) to receive cash or another financial instrument from a second entity or (2) to exchange other financial instruments on potentially favorable terms with the second entity.

Financial Asset

________ _________ __________ is one of the attributes used to measure assets and liabilities. It is the nondiscounted amount of cash, or its equivalent, that is expected to be received (paid) on conversion (liquidation) of the asset (liability) in due course of business less direct costs. _________ ________ _______ is the settlement cost and is used for short-term receivables and some inventories, trade payables, and warranty obligations.

Net Realizable Value

For a sales-type lease, the net investment in the lease is the sum of the lease receivable and the unguaranteed residual asset. For a direct financing lease, the net investment in the lease is the sum of the lease receivable and the unguaranteed residual asset, net of any deferred selling profit.

Net Investment in the Lease

A ______-_______ ________, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

Short-Term Lease

A _____ _________ is a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

Tax Position

In not-for-profit accounting: A _________ ____________ is a donor-restricted contribution that must be maintained to provide income for a specified period of time.

Term Endowment

_________ _______ ____________ are debt securities that are bought and held principally for the purpose of selling them in the near term and therefore held for only a short period of time. Trading generally reflects active and frequent buying and selling, and trading securities are generally used with the objective of generating profits on short-term differences in price.

Trading Debt Securities

A _____________ is a particular kind of external event, namely, an external event involving transfer of something of value between two or more entities. In exchange and exchange-like _______________, each party receives and gives up essentially equal values. State and local governments and not-for-profit entities also frequently engage in nonexchange _______________, in which a government/not-for-profit gives (or receives) value without directly receiving (or giving) equal value in return.

Transaction

__________ _____/________ are increases or decreases (gain/loss) in the cash flows of the functional currency that result from changes in the exchange rate between the functional currency and the currency in which the transaction is denominated. It is an increase/decrease in both (a) the actual functional currency cash flows realized upon settlement of the foreign currency transaction and (b) expected functional currency cash flows on the unsettled foreign currency transaction. (FASB ASC 830-20-40-1) __________ _____/_____shall be included in the determination of net income for the period in which the transaction is settled or at each balance sheet date. That is, each foreign currency transaction should be (1) measured and recorded in the functional currency of the recording entity on the transaction date, using the current exchange (spot) rate, and (2) recorded balances that are denominated in a foreign currency should be adjusted at the settlement date or the balance sheet date to reflect the then-current exchange rate. Any difference between these two valuations is a ____________ _______/_________. Example: Goods denominated in FC cost 10FC (i.e., the purchaser must pay the amount owed in FC, not in dollars). On the transaction date, the exchange rate is 1FC = $.20, so the payable, measured in domestic (functional) currency, is valued at $2. In order to settle the payable, the debtor must "buy" 10FC.If, at the payment date, 1FC = $.25, then it will "cost" $2.50 to pay the 10FC owed.The transaction results in an exchange loss of $.50 (actual cash flow). If the payable still exists at the end of the accounting period when the exchange rate is 1FC = $.25, a transaction exchange loss of $.50 (future cash flow) also results.

Transaction Gain (Loss)

The ___________ _________ is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Transaction Price

"_____________ ______" is the freight expense for goods received that will be sold to others in the normal course of business. ____________ _____ is included in the determination of the cost of goods acquired during the period and thus is included in cost of goods sold and ending inventory. It is the opposite of "transportation out."

Transportation In

"___________ ________" is the expense of shipping goods to customers in the normal course of business. It is a selling expense and the opposite of "transportation in."

Transportation Out

________ _______ is shares of the issuing corporation's own stock (common or preferred) that were issued and were later reacquired in the open market by the issuing corporation and are still held by the issuing corporation. ________ _______ is considered issued but not outstanding. It may be obtained through purchase, settlement of an obligation, or donation, and it may be retired or resold. _________ ______ does not carry voting, dividend, preemptive, or liquidation rights. _________ ________ may be accounted for under the par value or the cost method of accounting. Both methods are considered GAAP. _________ _______ is not an asset and does not affect income. It is a contra (negative) element of stockholders' equity—it decreases total equity. _________ _________ may increase or decrease contributed capital and may also decrease (but rarely increases) retained earnings.

Treasury Stock

The __________ _____ ________ is a computation applied to equity contracts to determine the number of common stock equivalents (CSEs) to use in computing EPS. It is a method of recognizing the use of proceeds that would be obtained upon exercise of options and warrants in computing earnings per share and assumes that all proceeds would be used to purchase common stock (treasury stock) at current market prices, up to 20% of total outstanding shares, with the balance applied first to reduce short-term, then long-term, debt and then to invest in U.S. government securities. It is the net increase in shares (the number of shares which would be issued if all equity contracts were exercised minus the number of shares of treasury stock which could be purchased according to this method) is added to the weighted-average number of common shares in the denominator of diluted EPS. It automatically excludes antidilutive equity contracts.

Treasury Stock Method

_________ ________ ________ is a situation in which the creditor/lender, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The concession either stems from an agreement between the creditor and the debtor or is imposed by a law or court decree. It means that the original terms of the debt are changed: (1) modifying terms to reduce or defer cash payments, or (2) accepting cash, other assets, or an equity interest in the debtor in satisfaction of the debt although the value received is less that the amount of the debt. Restructuring may occur before, at, or subsequent to maturity. The date for accounting recognition is the date of the consummation of the restructuring. Accounting recognition requires the recognition of a gain or loss by the debtor equal to the difference between the book value of the debt immediately before the restructuring and the total future cash equivalent payments of principal and interest (not discounted) after the restructuring for the debtor. The creditor recognizes a loss based on the original interest rate for the debt.

Troubled Debt Restructuring

Webster's dictionary defines "______________" as a payment in cash.

Disbursement

_________ _______ ________ is a short-cut cost flow method that approximates the results of LIFO, which measures inventory layers in terms of dollars rather than physical units. __________ ______ __________ requires the use of a price index and the concept of a base year (the year in which __________ _________ ____________ is adopted).

Dollar Value LIFO

A _________ _________ ___________ is a donor stipulation that specifies a future and uncertain event whose occurrence or failure to occur gives the promisor a right of return of the assets it has transferred or releases the promisor from its obligation to transfer its assets.

Donor Imposed Condition

__________ _________ are obligations to suppliers of merchandise or of services purchased on open account, with payment usually due in 30 to 60 days.

Accounts Payable

An ______________ is a business combination in which one entity achieves control over another, thus requiring combined financial statement presentation using "consolidated financial statements." Control is direct or indirect power over the management of another entity. An acquisition can occur when one company acquires a majority share in the voting stock of another enterprise but both entities continue their legal existence. Each company retains its legal existence in a parent-subsidiary relationship.

Acquisition

The ________ _______ is the beginning inventory of the period in which LIFO (last in, first out) is first adopted.

Base Layer

A _________ is an unsecured promissory note (bond) to pay a specified amount on a specified date.

Debenture

The _______ ______ __________ is the date on which the corporation's board of directors formally announces that a dividend will be paid. The formal declaration of a cash, property, or script dividend constitutes a legally enforceable contract between the corporation and the shareholders; thus, the debit to retained earnings should be recorded on this date—the credit can be to Dividends Payable until the date of payment. Stock dividends are not legally enforceable until paid; therefore, no entry is made on the ________ ________ _________.

Date of Declaration

The ________ ____ _________ is the date on which an individual is awarded an option or purchase right. It is the date on which the corporation forgoes the principal alternative use of the shares that it places subject to option (i.e., the sale of such shares in the open market). The date of grant is an important date in accounting for stock option plans.

Date of Grant

____________________________________ are those recognized changes in assets or liabilities necessary to effect a change in accounting principle (e.g., an adjustment to an inventory balance to effect a change in inventory valuation method.)

Direct Change in Accounting Principle

The _________ _________ is the price paid to acquire an asset or received to assume a liability in an exchange transaction.

Entry Price

__________ _____________ are completed goods awaiting sale. ___________ ____________ are the merchandise of a retailing firm and the completed items of a manufacturing firm.

Finished Goods

A ____________ _____________ is a currency other than the functional currency of the reference entity. Example: Any currency other than the dollar for a U.S. enterprise is a ____________ ________________.

Foreign Currency

The __________ ___________ is the exchange rate agreed upon currently for delivery of currencies at some specific date in the future.

Forward Rate

A ________ is a contribution or donation.

Gift

A ___________ ____________ is a business entity that is expected to continue in operation indefinitely. An enterprise that is no longer considered a ___________ ____________ is assumed to be approaching, or in the process of, dissolution.

Going Concern

"______________" is defined as an increase over some base value expressed as the difference between the new value and the base value. For example, if you have the value at time (t), the base, and the value at time (t - 1), the increment is the change in value that occurred between time (t - 1) and time (t).

Incremental

The __________ _________ ___________ is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Incremental Borrowing Rate

Expenses initially charged to one component of an entity may actually benefit the efforts and accomplishments of one or more other components of that entity. A major focus of management accounting is to understand these indirect expenses, which are often called "overhead." In the governmental environment, costs of functions such as general government and administration benefit other functions of the government and are thus indirect costs of those functions. ____________ ____________ may be allocated to other functions, but allocation is not required.

Indirect Expenses

__________ is a general increase in the level of prices, resulting in decreases in the purchasing power of money.

Inflation

____________ ____________ are "long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of ____________ ____________ include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems." (GASB 1400.103)

Infrastructure Assets

__________ _______ ___________ are the incremental costs of a lease that would not have been incurred if the lease had not been obtained.

Initial Direct Costs

_________ ___________ is one of the three categories of cash flows in the statement of cash flows. The category includes all transactions related to the making or collecting of loans and the acquiring and disposing of debt; equity instruments (of other entities); property, plant, and equipment; or a business unit.

Investing Activities

__________ is the state of being legally responsible for making good, making right, or making whole the wronged or owed party. _________ may include payment for debts, reimbursement for losses or damage, or payment of penalties.

Liability

________ is the convertibility of an entity's assets into ready cash to meet current obligations. Liquid assets are cash on hand and in banks and marketable securities readily convertible into cash.

Liquidity

________ __________ are current dollars, i.e., dollars expressed in terms of current prices as opposed to some constant value.

Nominal Dollars

In not-for-profit accounting: A _________ is a promise to give or contribute to a not-for-profit entity. While the term is commonly used, the Financial Accounting Standards Board (FASB) discourages its use because it can be misinterpreted as a mere intention to give. The FASB's preferred terminology is "promise to give."

Pledges

When accounts receivable are used as collateral, security for repayment of a borrowing transaction, but are not considered sold for cash, then they are referred to as pledged. This fact must be disclosed, but the receivables are not taken off the company's books. The loan transaction is accounted for separately, normally, with payment generally coming from receivable cash receipts.

Pledging of Accounts Receivable

____________ ________ are all forms of benefits, other than retirement income, that are provided by an employer to retirees. ____________ __________ may include such specified benefits as health care, tuition assistance, legal services, or life insurance. A ___________ __________ plan is an arrangement between an employer and employees providing employees with benefits after they retire in exchange for employees' services over a specified period of time. Benefits become payable upon attaining a specified age while in service, after a specified number of years of service, or a combination of both.

Postretirement Benefits

Management implicitly or explicitly makes assertions regarding the ____________ of information in the financial statements and related disclosures. Assertions about ____________ and disclosure include the following: Occurrence and rights and obligations—Disclosed events, transactions, and other matters have occurred and pertain to the entity. Completeness—All disclosures that should have been included in the financial statements have been included. Classification and understandability—Financial information is appropriately presented and described, and disclosures are clearly expressed. Accuracy and valuation—Financial and other information are disclosed fairly and at appropriate amounts. AU-C 315.A128(c) Example: An example of the classification assertion for presentation is that all long-term liabilities presented in the balance sheet will not mature in the next accounting period. An audit procedure to test this assertion is to vouch all long-term liabilities in excess of $5,000 to the source document and confirm the maturity date.

Presentation

________ ________ are distributions of noncash assets (e.g., investments in the securities of other enterprises, real estate, merchandise) to stockholders in proportion to the number of outstanding shares held. Accounting for ________ ________ involves a disbursement (credit) from the asset account (at the current market price) and a reduction (debit) to retained earnings and any resultant gain or loss (in conformity with the accounting for nonmonetary transactions in FASB ASC 845-10). A _________ __________ represents return to shareholders on investment.

Property Dividend

When an asset suffers a seemingly permanent loss in value, it is said to be impaired, the loss in value must be recognized as an impairment loss in the period in which it occurs, and the asset's book value is written down to what it is now worth. Sometimes an asset may regain its prior value, the loss is in fact reversed, and it could regain much or all of its prior value. This would be a _________________________. For U.S. GAAP, a ________________________ would never be recognized. For IFRS (International Financial Reporting Standards), it can be recognized.

Recover for Impairment

A ___________ is a procedure or policy that is prescribed by a body having the power to establish rules and laws. The regulator is the body itself.

Regulation

________ has been replaced by "faithful representation" by SFAC 8.3, QC5.

Reliability

________ is "the chance of the future event or events occurring is slight."

Remote

A ________ __________ is the time period between two balance sheet dates that is covered by the financial statements being audited. It is usually the calendar year; however, it may be any designated period (normally 12 continuous months).

Reporting Period

A _________ _______ _____________ is a guarantee made to a lessor that the value of an underlying asset returned to the lessor at the end of a lease will be at least a specified amount.

Residual Value Guarantee

___________ is the process of revising previously issued financial statements to reflect the correction of an error in those financial statements.

Restatement

_________ __________ (_________ ___________-) is the application of a different accounting principle to one or more previously issued financial statements, or to the statement of financial position at the beginning of the current period, as if that principle had always been used, or a change to financial statements of prior accounting periods to present the financial statements of a new reporting entity as if it had existed in those prior years.

Retrospective Application (Retrospective Approach)

The _________ ________ __________ is a method of interest income recognition under which income for the current period is measured as the difference between the amortized cost at the end of the period and the amortized cost at the beginning of the period, plus any cash received during the period.

Retrospective Interest Method

A _______ ______ _________ is a lease transaction in which the owner of the asset sells it and immediately leases it back from the buyer. It is subject to the same capitalization criteria as any lease agreement. Any profit (or loss) is deferred and amortized (by the lessee-seller) in proportion to the amortization of the leased asset (under a finance lease) or in proportion to the related gross rental to expense over the lease term (under an operating lease).

Sale and Leaseback

A ___________ ___________ is a contract to service financial assets under which the estimated future revenues from contractually specified servicing fees, late charges, and other ancillary revenues are not expected to adequately compensate the servicer for performing the service.

Servicing Liability

_______________________________________________________ presents the changes during the period in net assets available for distribution to investors and other claimants during liquidation.

Statement of Changes in Net Assets in Liquidation

A _________ ____________ is a difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively. _________ ___________ arise from items that are treated differently under GAAP than under the tax law, and the difference will reverse (create an offsetting amount) in the future, such as installment sales, warranty expense, and depreciation expense under different methods. Characteristics of temporary differences: They will be recognized in both accounting income and taxable income. They give rise to deferred income tax liability (DTL) or a deferred tax asset (DTA) due to differences in the timing of the recognition. They will reverse in one or more future periods. Some events recognized in financial statements do not have tax consequences, such as certain revenues that are exempt from taxation and certain expenses that are not deductible. Events that do not have tax consequences give rise to permanent differences.

Temporary Difference

_________ _________ are bonds that are scheduled to be outstanding for a fixed period of time, or term.

Term Bond

The life of the enterprise is divided into discrete, artificial periods of time (monthly, quarterly, yearly, etc.) to facilitate reporting and decision making. This assumption underlies the use of accruals and deferrals in accrual accounting.

Time Period

__________ is a quality of relevance. ______________ means having information available to decision makers in time to be capable of influencing their decisions. Generally, the older the information is, the less useful it is. However, some information may continue to be timely long after the end of a reporting period because, for example, some users may need to identify and assess trends.

Timeliness

The _________ _________ ___________ is the average cost flow assumption used with the periodic inventory system in which the unit cost is the average of beginning inventory and all purchases (sum of total cost of beginning inventory plus total cost of each purchase, divided by total units (beginning plus purchases)). It is applied to ending inventory and units sold and is used with the periodic inventory system because the average unit cost can only be determined at the end of the period. (See moving-average method.)

Weighted Average Method

A _________ ________ __________ is an insurance policy that may be kept in force for a person's entire life with payment of one or more premiums. A benefit is paid at the death of the insured. Nonforfeiture benefits also accrue. The premiums pay for protection in case the insured dies, and also builds cash value with the remaining premium. It is generally a low-return investment.

Whole Life Contract

To ________ _________ is to decrease a balance to net realizable value, usually because of damage, obsolescence, or market impairment (i.e., the _______ ________ of inventory or an investment).

Write Down

To _______ ________ is to remove an amount from the accounting records, usually by a corresponding entry to an expense or allowance account, as to write off a specific account receivable with a credit to accounts receivable and a debit to the allowance for uncollectible accounts.

Write Off

____________ _________ ______________ is a cost flow assumption based on the concept that the cost of inventory at the end of the period is representative of all costs during the period. It matches an _________ ____________ to current sales revenues generated. Average cost flow can be applied in two ways—weighted-average and moving average (giving slightly different results). Moving averages are determined whenever inventory amounts are increased in a perpetual inventory system, and weighted averages are determined at the end of the accounting period in a periodic inventory system. Both average costing methods provide unit costs (and cost of goods sold) intermediate between last in, first out (LIFO) and first in, first out (FIFO).

Average Cost Flow

A _________ is the right to receive payment or to sue; it can be used in bankruptcy to identify and categorize creditors.

Claim

In governmental accounting: Capital or resources are occasionally transferred to proprietary funds as capital contributions. Capital _________ are not displayed as a separate component of proprietary fund net position. (GASB P80.116) In not-for-profit accounting: A contribution is a voluntary, unconditional transfer of cash or other assets to a not-for-profit entity from an outside party. Forgiveness of debt can be a ___________. (FASB ASC Glossary) In employee benefits accounting: Amounts are paid into the plan by either the employer (plan sponsor) or participant. The amounts and timing of these ____________ are specified in the funding policy of the trust agreement. A common adjusting journal entry for accrual of _____________ receivable reflects a formal, legal, or contractual commitment. Evidence of a commitment includes (a) resolution by employer's governing board approving such a commitment, (b) consistent payment after plan year-end (historical funding policy), (c) deduction for income tax purposes by employer, and (d) recognition by employer of contributions payable. An employer's accrual for benefit costs by itself is not sufficient evidence to record _____________ receivable by the plan.

Contributions

__________ ___________ are payments expected by not-for-profit entities as of financial statement date from donors who have previously made commitments. Such commitments were previously known as "pledges," though use of that term is discouraged by the FASB. ___________ __________ can also refer to amounts due to pension plans from participants and employers.

Contributions Receivable

___________ ___________ is the ability to determine the operating and financial policies of an enterprise, and is usually ownership of more than 50% of the voting stock of an enterprise, but also may be present in cases of less than majority ownership.

Controlling Interest

The phrase "international _____________ of accounting standards" refers to both a goal and the path taken to reach it. The FASB believes that the ultimate goal of ____________ is a single set of high-quality, international accounting standards that companies worldwide would use for both domestic and cross-border financial reporting. Today, the path toward that goal is the collaborative efforts of the FASB and the International Accounting Standards Board (IASB) to both improve U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) and eliminate the differences between them.

Convergence

The _________ ___________ is a liquidity ratio that measures a firm's ability to discharge currently maturing obligations from existing current assets that are expected to be converted into cash within the maturing period of the claims. __________ ___________ is a measure of short-term solvency; however, it is less precise than the quick ratio because a sizable amount of total current assets may be tied up in inventory, which is less liquid. The computation is: Current assets ÷ Current liabilities Because balance sheet account totals are based on historical cost, which does not necessarily represent market value, the use of this ratio is limited.

Current Ratio

A __________ is a party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.

Customer

A ______ is an obligation to pay money, goods, or services due in the future to another entity (creditor). The debt may be payable on demand or at some fixed or determinable future date. The _______ is often evidenced by a legal document (_______ security or instrument) but may arise from a stated or implied contract. The debt may bear interest if it extends over time. _________ are claims against the assets of an entity, mortgages to which an asset is subject, or financial obligations for which an owner is liable. The indebtedness can be secured or unsecured, recourse or nonrecourse. To the extent that a partner is liable for the indebtedness, that partner's basis is increased. If the indebtedness is later reduced, that partner's basis is reduced. In governmental accounting, _______ is referred to as an obligation, encumbrance, or commitment.

Debt

The __________ _______ ____________ is the presumption that all economic events can be identified with a particular _________ __________ and that the activities of a company can be distinguished from those of its owners.

Economic Entity Assumption

A ____________ ____________ is an agreement with an unrelated party, binding on both parties and usually legally enforceable, with the following characteristics: The agreement specifies all significant terms, including the quantity to be exchanged, a fixed price, and the timing of the transaction. The fixed price may be expressed as a specified amount of an entity's functional currency or of a foreign currency. It may also be expressed as a specified interest rate or specified effective yield. The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Firm Commitment

To ___________is to give up claim to an asset or a right to receive an asset, usually as a penalty. For example, a team _______________ a game by not being on time. Employees forfeit all or partial rights to a pension by termination before being fully vested. A common revenue category in governmental accounting is Fines and ______________, which represents revenues resulting from imposed penalties or involuntary relinquishment of property. (GASB N50.104)

Forfeit

The _________ ________ is the primary governmental fund, used to account for all financial resources not required to be accounted for in another fund. It is an omnibus fund used to account for most routine general governmental operations—for a variety of revenue sources and a wide range of activities financed by these resources. A governmental unit will have only one general fund. GASB 1300.104 The __________ _________ is accounted for on the modified accrual basis. Budgetary accounts are used and integrated in the accounting records. Revenue sources generally include property and sales taxes, fees, fines, penalties, and user-based revenues. Functions financed usually include fire and police protection, sanitation, courts, libraries, and administrative and clerical activities.

General Fund

__________ _______ ________ __________ encompasses all the long-term liabilities of a government not directly related to or to be paid from proprietary or fiduciary funds or business-type resources. General obligation bonds are included along with other forms of long-term indebtedness such as pensions, long-term finance leases, and landfill closure and postclosure care.

General Long Term Debt

___________ _________ _____________ are long-term debt that is backed by the "full faith and credit" of the governmental entity or by the general tax revenues of the government. This type of debt is not reported as a liability in a governmental fund but should be reported only in the governmental activities column in the government-wide statement of net position.

General Obligation Bonds

The ____________ ____________ _____________ is the presumption that a business entity will continue to operate indefinitely.

Going Concern Assumption

_________ ___________ is one of the attributes used to measure assets and liabilities. It is the amount of cash, or its equivalent, paid to acquire the asset (or received to incur the liability). __________ __________ is used for property, plant, and equipment, and most inventories. It is also called the "historical exchange rate" or "transaction-based."

Historical Cost

A __________ _______ ______ ___________ is the net change in fair value of a security. The holding gain or loss does not include dividend or interest income recognized but not yet received, write-offs, or the allowance for credit losses.

Holding Gain or Loss

The ________ __________ is a combination of the cash and accrual methods. Generally, a company using the cash method must use the accrual method for the accounts involved in computing cost of goods sold and gross profit if inventory is a material income-producing factor. The cash method can be used for all other accounts.

Hybrid Method of Determining Taxable Income

__________ ________ __________ is the sum of income taxes currently payable or refundable and deferred tax expense (or benefit).

Income Tax Expense

An intangible asset may have no absolute limit on its use or renewal, no final legal life, nor any clear economic limit to its use. A trademark may be affordably renewable for as long as one needs, and hence has an ________ ________, not a limited useful life. Such an asset would not be amortized, but instead tested annually for possible impairment.

Indefinite Life

An _________ __________ is a cost that is not directly traceable to the manufactured product, is associated with the manufacture of two or more units of finished product, or is an immaterial cost that cannot be economically traced to a single unit of finished product.

Indirect Cost

___________________________________________________ are any changes to current or future cash flows of an entity that result from making a change in accounting principle that is applied retrospectively. An example of an indirect effect is a change in a nondiscretionary profit-sharing or royalty payment that is based on a reported amount such as revenue or net income.

Indirect Effects of a Change in Accounting Principle

An ____________ is one payment in a series of payments required over time to settle a debt.

Installment

_________ is the utility of (benefit to be derived from) an asset at a given date. In the lower of cost or market, market is the replacement cost, either by purchase or by production, within the floor and ceiling limits. It is the equivalent expenditure that would have to be made in the ordinary course of business at that date to procure corresponding utility (benefit). _________ should not exceed the net realizable value (i.e., estimated selling price in the ordinary course of business less reasonable costs of completion and disposal) ("ceiling"). ___________ should not be less than the net realizable value reduced by an allowance for an approximately normal profit margin ("floor").

Market

The _________ __________ is the price at which a product, service, or security is offered or can be sold for in the marketplace.

Market Price

The __________ ________ ________ __________ relates to a credit transaction that would be agreed to by reasonable parties for the transaction. The t ________ _______ ________ ________ is what a knowledgeable lender would charge the debtor under the circumstances of the deal, including collateral, term, etc. This is the true yield of the transaction for the creditor and is used as a discount rate in finding a present value of the payments to be received.

Market Rate of Interest

The _________ __________ is the date on which a loan, bond, debenture, or other obligation becomes due and must be paid in full by the borrower.

Maturity Date

The FASB defines _________ __________ as "money or a claim to receive a sum of money the amount of which is fixed or determinable without reference to future prices of specific goods or services."

Monetary Assets

_______ ________ _______ ________ is the amount recognized in employer financial statements as the cost of the pension plan for an accounting period. It is computed for each accounting period and some are added to PBO (projected benefit obligation). It is computed without regard to the amount of funding for the period. (FASB ASC 715-30-20) Components are the following: Annual pension plan costs:Service cost (from PBO computation by actuary)Interest cost (from PBO increase due to the passage of time, closer to payment) Annual pension plan earnings:Expected return on plan assets (from fund status provided by trustee) Delayed recognition (amortization of unrecognized pension costs):Amortization of unrecognized net asset or obligation existing at the date of initial application (transition cost) (computed by employer) Amortization of unrecognized prior service cost (computed by employer) Amortization of gain/loss (computed by employer) Actuarial gain/loss (change in PBO due to changes in actuarial assumptions) Plan assets (difference between actual and expected return)

Net Periodic Pension Cost

_______ _________ is gross sales less returns, less allowances, and less sales discounts.

Net Sales

A ____________ __________ is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A ________________ ____________ is sometimes called a minority interest. For example, 80% of a subsidiary's ownership (equity) interests are held by the subsidiary's parent, and 20% of a subsidiary's ownership interests are held by other owners. The ownership interests in the subsidiary that are held by owners other than the parent are a ____________ __________. The _____________ ____________ in a subsidiary is part of the equity of the consolidated group.

Noncontrolling Interest

In governmental accounting, a ___________ ____________ involves a government receiving value from another party without directly providing value in return or a government providing value without directly receiving payment in return. Examples of governments receiving value in _________ __________ would be derived tax revenues such as sales taxes dependent on retail trade and imposed tax revenues such as property taxes. Examples of governments providing value in nonexchange transactions would include a local government providing services pursuant to a state mandate or a government providing grants or entitlements to specific recipients.

Nonexchange Transactions

________ _______/______ is the computation of the net difference between the income earned and expenses incurred in operating a trade or business. Sole proprietorships report their operating income on Schedule C of Form 1040 while a corporation reports its net operating income on Form 1120. For partnerships, the computation is a bit more complex. A partnership initially computes its income and files its return in the same way as an individual does. However, a partnership must state certain items of gain, loss, income, etc. separately and certain deductions are not allowed to the partnership. The partnership, not the partners, makes most choices about how to compute income. These include choices for accounting methods, depreciation methods, accounting for specific items such as depletion or installment sales, nonrecognition of gain on involuntary conversions of property, and amortization of certain organization fees and business startup costs of the partnership. However, each partner, not the partnership, decides how to treat foreign and U.S. possessions taxes, certain mining exploration expenses, and income from discharge of indebtedness.

Operating Income/Loss

The __________ _________ is defined in FASB ASC 820-10-20 as "the market with the greatest volume and level of activity for the asset or liability."

Principal Market

___________ ____________ is the activity of making loans or other investments that are directed at carrying out a not-for-profit entity's purpose for existence rather than investing in the general production of income or appreciation of an asset (for example, total return investing). An example of programmatic investing is a loan made to lower-income individuals to promote home ownership.

Programatic Investing

_______ ____________ are goods to be consumed directly or indirectly in the production process and include major basic materials, parts and subcomponents, and basic supplies (lubrication oils, cleaning materials, nails, glue, etc.).

Raw Materials

_____________ ____ ______ _________ is the simultaneous increase of one class of net assets and decrease of another. A _____________ ____ ____ _______ usually results from a donor-imposed restriction (donors include other types of contributors, including makers of certain grants) being satisfied or otherwise lapsing.

Reclassification of Net Assets

_________ ________ include the following: Affiliates of the entity Entities for which investments in their equity securities would be required, absent the election of the fair value option, to be accounted for by the equity method by the investing entity Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management Principal owners of the entity and members of their immediate families Management of the entity and members of their immediate families Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests

Related Parties (Financial Statements)

_________ _________ are long-term debt that is to be repaid from the revenues of a proprietary fund. This type of debt is accounted for in the appropriate fund itself—usually an enterprise fund.

Revenue Bonds

The _________ _______ __________ is the price at which an entity would sell a promised good or service separately to a customer.

Standalone Selling Price

________ ________ is the total amount of income tax that is owed to the federal government (tax paid plus payable (or refundable)) as a result of the computations on the tax return in conformity with the provisions of the current tax law. It represents that portion of the total tax expense which is attributable to the current period. It is added to the deferred tax expense (computed independently) to give the total tax expense for the period. The unpaid portion is reported as a liability on the statement of financial position until it is paid. The income ______ ___________ as computed on the tax return (which equals the current tax expense) does not necessarily equal the amount reported as the liability "Income Tax Payable." The amount reported as the liability is the portion of the total income tax payable (current tax expense) that remains unpaid.

Tax Payable

A ______ _______ is the percentage applied to taxable income to compute tentative income tax payable.

Tax Rate

The ___________________________________________________ was adopted to provide guidance and rules to all members in the operation of their professional responsibilities. Members include those in public practice, government, industry, and education jobs.

The AICPA Code of Professional Conduct

In governmental accounting, some interfund transactions are termed "____________." These transactions represent a payment or receipt of resources by one fund from another without requirement for repayment or other reciprocation. These are internal transactions within a government. Many interfund transactions are between governmental funds and thus are not represented on the government-wide financial statements because they occur completely within governmental activities. Interfund _____________ between governmental funds and enterprise funds may be reflected as movement of resources between business-like and governmental activities and do appear as transfers on the government-wide financial statements.

Transfers

__________ ________ are fiduciary funds used to account for assets held by a governmental unit in a trustee capacity for others and, thus, cannot be used to support the government's own purposes. _________ _________ are: private-purpose _________ _________, investment _________ _________, and pension _________ __________.

Trust Funds

An ___________ _________ ___________ is a donor-restricted endowment fund for which the fair value of the fund at the reporting date is less than either the original gift amount or the amount required to be maintained by the donor or by law that extends donor restrictions.

Underwater Endowment Fund

In not-for-profit accounting: A ___________ ________ ______ _______ ___________ is an entity formed for the purpose of performing voluntary services for various segments of society. Such entities exist for the benefit of the public and are supported by the public; they are tax-exempt. Most __________ ________ _______ ________ __________ concentrate their efforts to solve particular health and welfare problems of society or of specific individuals. (FASB ASC Glossary) Note: ___________ ________ _______ ________ __________ were previously called "organizations"; however, the FASB has determined that the term "organization" should be discouraged and replaced with the term "entity."

Voluntary Health and Welfare Entity

"_________ ____________-" is the condition under which the transferor of the accounts receivable agrees to reimburse the transferee for specified collection losses on pledged, factored, or assigned agreements due to (1) failure of debtors to pay when due, (2) estimated effects of prepayments, or (3) adjustments resulting from defects in the eligibility of the transferred receivables. The risk of default remains with the transferor. The transferor must include an allowance for uncollectible pledged, factored, or assigned accounts and incur a liability for estimated losses on these accounts. "_________ ____________" is the condition under which the transferor of the accounts receivable is not obligated to reimburse the transferee for specified collection losses on pledged, factored, or assigned agreements due to (1) failure of debtors to pay when due, (2) estimated effects of prepayments, or (3) adjustments resulting from defects in the eligibility of the transferred receivables. The risk of default is assumed by the transferee. The transferor does not need an allowance for uncollectible pledged, factored, or assigned accounts and does not incur a liability for estimated losses on these accounts. Any difference between the total amount of accounts transferred and cash received is treated as interest expense or loss on the sale.

With and Without Recourse

______ is the actual rate of return (effective rate) on an investment as distinct from the nominal or stated rate. It is the dividends paid per share during a given year divided by the purchase price of the shares. It is the interest received by the owner of a bond during the year divided by the purchase price of the bond.

Yield

___________ ____-__ is the annual report required to be filed with the Securities and Exchange Commission (SEC) by all publicly traded companies. It provides a comprehensive report of a company's business and financial condition, including audited financial statements.

Form 10-K

An _________________ _______________ is a change in (1) an accounting principle, (2) an accounting estimate, or (3) the reporting entity. The correction of an error in previously issued financial statements is not an ______________ ____________

Accounting Change

___________-___________ ________ _________ are net assets without donor restrictions subject to self-imposed limits by action of the governing board. __________-___________ _______ _________ may be earmarked for future programs, investment, contingencies, purchase or construction of fixed assets, or other uses. Some governing boards may delegate designation decisions to internal management. Such designations are considered to be included in ____________-_________ ________ ________

Board-Designated Net Assets

The __________ __________ records the receivable (payable) and the sale (expense) at the total amount of the sale before any cash discount. Any discount taken is recorded as a contra account (sales or purchase discounts) or, if using the perpetual inventory system, a reduction in inventory cost. The net method is conceptually preferable.

Gross Method

The _______ ________ is the exchange rate for immediate delivery of currencies being exchanged. It is the exchange rate existing on a particular date currently (today). (FASB ASC 815-20-55-51)

Spot Rate

The ____________/___________ _____________ is the method prescribed by FASB ASC 740-10 for recognizing deferred tax liability or asset. It emphasizes the balance sheet item—the deferred tax liability or asset is computed first (independently) and the tax expense is then computed as the change in the liability (asset). The balance sheet item (usually a liability) is the basis and determinate of the expense. Reversal of the deferred tax item is directly related to the settlement of the liability (payment date) or the recovery of the asset (life). The ______________/____________ ____________ prescribes the use of future tax rates (i.e., rates that will be in effect when the temporary difference reverses) to compute the amount of the deferred tax liability. It provides for the adjustment of the deferred tax liability due to changes in the tax law. The ______________/____________ ______________ does not require that deferred tax liability be discounted (for the time value of money).

Asset/Liability Method

The __________ ________ is the price at which a customer would purchase a component of a contract separately.

Standalone Price

____________ are a measure of the performance of the enterprise during the period. __________ measure the extent to which asset inflows (revenues and gains) associated with cash-to-cash cycles substantially completed during the period exceed (or are less than) asset outflows associated, directly or indirectly, with the same cycles. (SFAC 5.33-.38) Similar to net income (___________ do not include the cumulative effect of certain accounting adjustments of earlier periods that are recognized in the current period), ___________ are a measure of the performance for the current period and to the extent feasible excludes items that belong primarily to other periods. It is narrower, or less than, comprehensive income. ____________ are also called "net income" (loss) or "profits" in common practice. "____________" are not strictly the same as "net income."

Earnings

The _______ ___________ is either the period over which an asset is expected to be economically usable by one or more users or the number of production or similar units expected to be obtained from an asset by one or more users.

Economic Life

___________ _____________ is one of the three categories of cash flows on the statement of cash flows. It includes all transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment and to obtaining and repaying debt, including short-term and long-term debt, mortgages, finance lease obligations, seller-financed debt, and debt incurred to acquire treasury stock. (FASB ASC 230-10-20) In governmental accounting, there are two categories of __________ ______________reported on the cash flow statement of proprietary funds or governments engaged in business-type activities: "noncapital financing activities" and "capital and related financing activities." (GASB 2450.117-.122)

Financing Activities

____________________________ is a cost flow assumption that matches the oldest costs to current sales revenues. It is based on the assumption that the oldest units are sold before units subsequently received (or produced) and thus are the first units used to determine cost of goods sold. As a result, the units left in ending inventory are the newest, or most recently received (produced), units. ___________ produces an inventory value that approximates current cost. The flow of costs approximates the usual physical flow of units (cash outflow is recognized in the same order as cash inflows). The criticism of this method is that it does not match current costs against current revenue—as costs are rising, reported income will be higher than under LIFO or average cost.

First in, First out (FIFO)

__________ ____________ are tangible (i.e., having physical substance), long-lived (more than one accounting period) assets held for and used in the operations of the enterprise which provide measurable future benefits. They represent a bundle of benefits acquired by the entity to be used over the life of the asset (which covers several accounting periods) and are recorded initially at acquisition cost, which is then allocated to the periods benefited through depreciation (except for land). There is a periodic charge to expense of that portion of the cost which was "consumed" in the form of benefits received from the use of the asset. _________ ______________ are never written up to reflect appraisal, market, or current values but are written down to reflect a permanent decline in usefulness to the net realizable value at that date (e.g., obsolete equipment). ___________ ____________ are also known as "capital assets," and that term is customary for governmental accounting. The three general categories of capital assets are as follows: Nondepreciable (e.g., land) Depreciable (e.g., office buildings, factories, warehouses, equipment, machinery, tools, furniture, and fixtures) Depletable (e.g., timber, mineral, oil, and gas rights) For state and local governments, fixed assets are termed "general capital assets" and infrastructure assets such as sidewalks are also reportable as general capital assets. Capital assets are reported in government-wide financial statements but they are not reported in governmental funds.

Fixed Assets

The ________ ______ ____ ____________ is a depreciation method that applies an average rate of depreciation to a homogeneous group of assets. The homogeneous group is based on similar use characteristics and similar useful life (e.g., all trucks). It is based on the total carrying amount of the group regardless of the age of each individual asset in the group. No gain or loss is recognized on the disposal or retirement of an individual asset in the group. The computation is: ___________ __________ = Average deprecation rate expense × Group total carrying amount

Group System of Depreciation

__________ ________ ________ _________ _____________ are the expected annual rates of change in the cost of health care benefits currently provided by the postretirement benefit plan, due to factors other than changes in the demographics of the plan participants, for each year from the measurement date until the end of the period in which benefits are expected to be paid. Past and current health care cost trends should be used in developing the employer's assumed __________ _________ _______ _______.

Health Care Cost Trend Rates

In SFAC 2, the ________ _____ _________ _______________ was a ranking of the qualities of accounting information. SFAC 8.3 replaced the "hierarchy" with "qualitative characteristics of useful financial information."

Hierarchy of Accounting Qualities

The FASB defines __________________________________________________________ as "a method of accounting based on measures of historical prices in units of a currency, each of which has the same general purchasing power."

Historical Cost-Constant Purchasing Power Accounting

_____________ is the reinstallation, rerouting, or changing the floor plan of operational assets. An example is the _______________ of factory machinery for improved efficiency and work flow. ________________ is capitalized as deferred changes (____________________ costs) and amortized over the periods benefited.

Rearrangement

The __________ ___________ is a financial statement that shows an organization's revenues and expenses for a defined period of time. The __________ ___________ is the financial statement used most often by investors as it provides information concerning the firm's ability to sustain ongoing operations profitably. The _________ ___________- is also the statement that is most readily understood. The single-step __________ ___________ displays the net income from ordinary operations without intermediate calculations. The multi-step income statement uses intermediate steps such as gross profit in displaying the net income from ordinary operations.

Income Statement

The _________ ___________ is a method of accounting enabling a taxpayer to spread the recognition of gain on the sale of property over the payment period. Under this procedure, the seller computes the gross profit percentage from the sale (i.e., the gain divided by the contract price) and applies it to each payment received to arrive at the gain to be recognized.

Installment Method

The ________ __________ is the date of the lease agreement or commitment, if earlier. For purposes of this definition, a commitment shall be in writing, signed by the parties in interest to the transaction, and shall specifically set forth the principal provisions of the transaction. If any of the principal provisions are yet to be negotiated, such a preliminary agreement or commitment does not qualify for purposes of this definition.

Lease Inception

A ________ _________ is a change to the terms and conditions of a contract that results in a change in the scope of or the consideration for a lease (for example, a change to the terms and conditions of the contract that adds or terminates the right to use one or more underlying assets or extends or shortens the contractual lease term).

Lease Modification

The __________________________________________________ (________) are the principles-based Standards, Interpretations, and Framework adopted by the International Accounting Standards Board (IASB).

International Financial Reporting Standards (IFRS)

______ _______ _____________ are equity and debt securities of another enterprise held by the entity that are not intended to be converted into cash within one year or one operating cycle, whichever is longer. ______ ______ _________ includes common stock and preferred stock, classified as available-for-sale, and long-term notes and other debt securities, classified as held-to-maturity or available-for-sale, which the investor intends to hold for a period of time in excess of one year or one operating cycle. These investments include _______ _______ __________ in equity and debt securities of another entity (long term by investor intent), investments in subsidiaries, funds set aside for further use, and long-lived operational (fixed) assets, such as land, plant, and equipment.

Long Term Investments

___________ ____________ is one of the three categories of cash flows in the statement of cash flows. __________ _____________ are all transactions and other events that are not investing or financing activities. __________ ___________ generally include transactions that enter into the determination of net income and include production and delivery of goods and services, interest and dividends received, and payment of interest.

Operating Activities

The __________ __________ is the average period of time between the disbursement of cash to acquire materials or services used in the earning process and the receipt of cash upon completion of the process. It is a continuous repetitive process or cycle of operations by which goods are acquired and sold, and further goods are acquired for additional sales. The ________ _______ is the period of time between the expenditure of cash for goods and services and their conversion back to cash (from cash to inventories, to accounts receivable, and back to cash). It usually ranges from a few weeks to a few months, but may be longer than one year for long-term construction contracts. The cycle is used in the determination of "short term": i.e., the longer of one calendar year or the normal _________ _________.

Operating Cycle

From the perspective of a lessee, an _______ ________ is any lease other than a finance lease. From the perspective of a lessor, an _________ ________ is any lease other than a sales-type lease or a direct financing lease.

Operating Lease

An _________ _________ is a component of an enterprise: that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise), whose operating results are regularly reviewed by the enterprise's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. An __________ ____________ may engage in business activities for which it has yet to earn revenues; for example, start-up operations may be _________ __________ before earning revenues.

Operating Segment

__________ refers to the number of shares of capital stock that have been issued and are currently owned by stockholders. Treasury stock is not considered to be "_____________" since it is owned by the issuing corporation, not by outside shareholders. ______________ is an important aspect of earnings per share calculations. The number of bonds that have been issued and are currently owned by bondholders and accounts receivable that have not been collected are both examples of outstanding numbers.

Outstanding

__________ is all costs of the manufacturing process other than direct labor and direct materials. _____________ is all costs that cannot be economically traced to individual units of finished product and includes indirect labor (e.g., foremen's salaries), indirect materials (e.g., oil and lubrication for machinery), and miscellaneous indirect costs (e.g., depreciation, manufacturing utilities costs, rent, insurance).

Overhead

A ________ is the investor company that owns over 50% of the outstanding voting stock of another (investee) company, the majority interest, or the controlling interest. In a _________-subsidiary relationship, both corporations continue to exist as separate legal (accounting) entities. The financial statements of the __________ and the subsidiary are usually consolidated and viewed as a single economic unit for reporting purposes only.

Parent

A _________ is the exclusive right granted by a government to an inventor to use, sell, manufacture, or control the invention for a specified period of time. A _________ is an intangible asset that is identifiable and separable, may be purchased or developed internally, and has a legal life of 17 years (useful life may realistically be shorter than 17 years). Patents are recorded at cost and amortized straight-line over the shorter of the useful life or 17 years.

Patent

A _______ ________ __________ is an adjustment made directly to the retained earnings account to correct errors made in prior accounting periods.

Prior - Period Adjustment

If an event is _________, the future event or events are likely to occur.

Probable

____________ is an action to bring two related balances into agreement, to identify differences between two related balances (as, for example, the cash balance per the accounting records and the balance per the bank statement), and to detect errors or items that were included in the preparation of one balance omitted from the other. _______________ is also applied to any two balances that should agree (i.e., accounts payable or receivable per the accounting records and per the creditor/debtor, investment balances per the records and per the trustee, etc.).

Reconciliation

_________ _________ are items that must be added to one given balance (e.g., bank statement balance) to bring it into agreement with another balance (e.g., the cash balance per the accounting records). Examples include outstanding checks, deposits in transit, service charges, and interest.

Reconciling Items

_______ is the amount paid to use (but not own) a factor of production, e.g., land or capital. It is a very small component of GNP. Rent is used in the income approach to national income accounting and is both a microeconomic and macroeconomic concept. _______ includes payments for housing and imputed rent for owner-occupied housing as well as payments by firms for the use of land and buildings and productive assets. ________ is analogous to wages and interest as a component of factor payments/factor income. ________ is not to be confused with economic rent, which is the excess of total earnings over transfer earnings. Economic rent is the amount in excess of the amount a factor of production must earn in its current use to prevent it from moving to an alternative use. Economic rent is analogous to profit as the excess of income over opportunity costs.

Rent

Installing a major component with a similar or improved type is considered _____________ and not repair. It is often difficult to distinguish ____________ from major repair—replacement of a roof with the same or an improved type of roof, for example. _______________ are capitalized (as capital expenditures) and depreciated over the remaining (usually extended) useful life of the asset.

Replacement

The ________ _________ is a generally accepted accounting principle that provides guidelines for the measurement and timing of the recording (recognition) of revenues. The revenue principle requires accrual accounting and that the recognition criteria be met. (SFAC 5.63-.77) Revenue is realized when noncash resources and rights are converted into money. Revenue is measured at the exchange values of the assets or liabilities involved, usually the market value of the resources given up (SFAC 5.83). Revenue should be recognized when it is earned, measurable, and collectible. Revenue has been earned when the entity has substantially completed what it must do to be entitled to the benefits represented by the revenues, related expenses can be reasonably estimated, and collection is reasonably assured. The earning process is then said to be complete. There are seven accepted criteria for revenue recognition: Point of sale Production and delivery—recognize prepayment (magazine subscription) Percentage of completion—long-term contract With passage of time—e.g., rent, interest Completion of production (before sale)—when product is readily salable at determinable prices without significant effort Completed transaction—in exchange for noncash assets Installment basis—when cash is collected (because of the inability to estimate collectibility)

Revenue Principle

A ______ _____ _______ (_______) asset represents a lessee's right to use an underlying asset for the lease term.

Right of Use Asset (ROU)

_________ ________ are the expenses of promoting, marketing, selling, and distributing goods and services. Such expenses include sales personnel's salaries, sales commissions, traveling expenses of sales personnel, advertising, sample costs, and product shipping costs. These expenses may be combined with administrative expenses and reported as a single line item: selling and administrative expenses.

Selling Cost

A __________ event occurs twice a year (every six months). Bond interest payments often are paid semiannually.

Semiannual

The _________ _______ ________ is the interest rate stated on the face of the debt instrument (note or bond). It is the rate used to determine the amount of cash that will be paid (received) on the principal amount of the debt. Example: A $1,000, 20-year bond bearing interest at 10% annually where the stated interest rate is 10% and cash interest paid is $100 per year. Remember: Principal × Interest rate × Time. So, it would be $1,000 × .10 per year × 1 year.

Stated Interest Rate

The Comprehensive Annual Financial Report (CAFR) prepared by governmental entities includes an Introductory section, a Financial section, and a __________ __________. The __________ ____________ consists of comparative data for several periods of time and may contain nonaccounting information such as assessed valuations and population data.

Statistical Section

The _________ _________ is the period during which an employee must render service to the employer to be eligible to exercise the award.

Vesting Period

A _________ _______ is a government issue with a longer maturity than a T-bill or a Treasury note. ________ ________ have maturities of 10-30 years. These obligations can be obtained from the Federal Reserve Bank, brokerage houses, or commercial banks. Like T-bills, they have an active secondary market and provide liquidity.

Treasury Bond

___________ __________ _________ ___________ is the liability that results from the underfunding of the pension fund, i.e., the excess of recognized pension expense over the cash payments made into the pension fund. (FASB ASC 715-30-20)

Unfunded Accrued Pension Cost

The _____________ _________ ___________ is the amount that a lessor expects to derive from the underlying asset following the end of the lease term that is not guaranteed by the lessee or any other third party unrelated to the lessor, measured on a discounted basis.

Unguaranteed Residual Asset

An _____________ ______________ is an attempt to quantify the effects of future events that cannot be known with certainty, based on assumptions and projections. Examples of such future events whose effects must be estimated include uncollectible receivables, inventory obsolescence, useful service lives and salvage values of depreciable assets, warranty costs, periods benefited by deferred costs, and recoverable mineral reserves. Estimates require the exercise of judgment; and estimates change as new events occur, as more experience is acquired, or as additional information is obtained.

Accounting Estimate

________________ is the portion or percentage of customers eligible to qualify for an offer that ultimately will not earn or claim an incentive award or consideration (such as rebates or refunds) from a vendor.

Breakage

_______ _________ is ownership interest that is subordinate to all other classes of stock (and to all creditors) of the issuing corporation in participation rights and in dividend and liquidation preferences (i.e., holders of __________ _________ are paid after debt and preferred stock obligations have been met). _________ ___________ is also known as residual ownership interest and usually carries voting rights (at stockholders' meetings), although some classes of _________ ___________ may be nonvoting. ___________ ________ is often called common shares.

Common Stock

Debt and bond issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Amortization of debt issuance costs is reported as interest expense.

Debt Issue Cost

The ___________ ___________ is the date on which the grantee takes advantage of the option to purchase shares under a stock option or stock rights plan.

Exercise Date

A _____________ __________ ___________ is a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.

Financial Reporting Framework

A ____________ ____________ _______________ is a transaction whose terms are denominated (fixed) in a currency other than the entity's functional currency. These transactions arise when an enterprise: buys or sells on credit goods or services whose prices are denominated in a foreign currency, borrows or lends funds and the amounts payable or receivable are denominated in a foreign currency, is a party to an unperformed forward exchange contract, or for other reasons, acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency.

Foreign Currency Transaction

_________ _____________ is the currency of the primary economic environment in which the entity operates, i.e., the currency in which the entity normally generates and expends cash (usually the local currency). The functional currency depends on the facts and circumstances of the environment in which the entity operates. (FASB ASC 830-10-20) Economic factors that should be considered, individually and collectively, in the determination of the functional currency include the following: Cash flow indicators Sales price indicators Sales market indicators Financing indicators Intercompany transactions and arrangements indicators Management judgment (__________ ____________ may or may not be the same as the local currency and the reporting currency of the entity.)

Functional Currency

___________ ___________ ________________ is a method of grouping expenses according to the purpose for which costs are incurred. The primary functional classifications of a not-for-profit entity are program services and supporting activities.

Functional Expense Classification

The account called ___________________________________________ is credited when the Encumbrances account is debited to recognize the probable effect of financial commitments on the current-year budgetary appropriation. The entry is reversed when the commitments are recognized. _________________________________________________________ is not a liability; rather, it is considered a "memorandum" offset to Encumbrances during the fiscal year. At year-end, Encumbrances and ___________________________________________ are removed and a portion of the Fund Balance is labeled "committed" or "assigned" unless there is already a portion of the Fund Balance labeled "restricted" regarding the specific commitment represented by the original Encumbrance.

Fund Balance - Reserve for Encumbrances

___________ is an asset that represents a future economic benefit arising from other assets acquired in a business combination or an acquisition by a not-for-profit entity that are not individually identified and separately recognized. ____________ is generally calculated as the difference between the amount paid for a business minus the fair market value (FMV) of the net assets acquired.

Goodwill

________________________________________________ (___________) are basic accounting principles and standards and specific conventions, rules, and regulations that define accepted accounting practice at a particular time by incorporation of consensus and substantial authoritative support. The Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification) is the source of authoritative _________________________________________________ (_____________) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative _________ for SEC registrants. In addition to the SEC's rules and interpretive releases, the SEC staff issues Staff Accounting Bulletins that represent practices followed by the staff in administering SEC disclosure requirements, and it utilizes SEC Staff Announcements and Observer comments made at Emerging Issues Task Force (EITF) meetings to publicly announce its views on certain accounting issues for SEC registrants. (FASB ASC 105-10-05-1) Accounting and financial reporting practices not included in the Codification are nonauthoritative. Sources of nonauthoritative accounting guidance and literature include, for example, the following: Practices that are widely recognized and prevalent either generally or in the industry FASB Concepts Statements American Institute of Certified Public Accountants (AICPA) Issues Papers International Financial Reporting Standards (IFRS) of the International Accounting Standards Board Pronouncements of professional associations or regulatory agencies Technical Information Service Inquiries and Replies included in AICPA Technical Practice Aids Accounting textbooks, handbooks, and articles The appropriateness of other sources of accounting guidance depends on its relevance to particular circumstances, the specificity of the guidance, the general recognition of the issuer or author as an authority, and the extent of its use in practice. (FASB ASC 105-10-05-3)

Generally Accepted Accounting Principles (GAAP)

An ____________ transaction occurs between members of the same commonly controlled group of entities (e.g., sales or loans made between parent and subsidiary or between two subsidiaries of the same parent). ______________ transactions and profits must be eliminated from consolidated financial statements.

Intercompany

__________ _____________ are financial statement amounts that arise from transactions between members of the same commonly controlled group of entities (parent-subsidiary, subsidiary-subsidiary), i.e., transactions between two entities that are related parties. They may be receivables/payables or profit/expense from the sale of merchandise, or loan receivable/payable. _________ __________ must be eliminated from consolidated financial statements.

Intercompany Profits

The __________ __________ is a method of allocation such that a constant rate of revenue/expense allocation is used. Each period a constant rate of interest is applied to the remaining balance of the obligation, resulting in a different dollar amount of revenue/expense recognized each period.

Interest Method

___________ _________ __________ assumptions are conceptual methods of applying costs to inventories, alternative pricing methods, conceptual matching of inventory costs to sales, and methods for allocation of costs to inventory and cost of goods sold. The cost (cost of goods sold) to be matched against revenue from a sale will usually not be the identified cost of the specific item that was sold (except with the specific identification cost flow assumption), especially in cases in which similar goods are purchased at different times and at different prices. There are four assumptions that are acceptable under GAAP: LIFO (last-in, first-out):Unit cost LIFODollar-value LIFO FIFO (first-in, first-out) Average cost:Weighted averageMoving average Specific identification Cost flow assumptions are based on the cost principal with emphasis on the order in which the actual unit costs incurred are assigned to ending inventory and to cost of goods sold in conformity with the matching principle.

Inventory Cost Flow Assumptions

_________ _________ are the number of shares of authorized capital stock that have initially been released to individuals or entities outside the issuing corporation. They may have been exchanged for cash or services received. Treasury stock is considered as "issued" since these shares were originally released to outsiders. The subsequent ownership by the issuing corporation does not change the status of these shares as "issued."

Issued Shares

_______ __________ are the excess or deficiency of assets over liabilities of a not-for-profit entity, which is divided into two mutually exclusive classes according to the existence or absence of donor-imposed restrictions.

Net Assets

_________________________________ are the part of net assets of a not-for-profit entity that is not subject to donor-imposed restrictions. (Donors include other types of contributors, including makers of certain grants.)

Net Assets Without Donor Restrictions

_________ __________ __________ includes revenues, expenses, gains, and losses that, in accordance with generally accepted accounting principles, are included in comprehensive income but excluded from net income.

Other Comprehensive Income

____________________________________ (APB) was an AICPA body which promulgated official financial accounting standards (Opinions) from 1959 to 1973; predecessor to and replaced by FASB. _______________________________ Opinions are still considered official pronouncements (GAAP).

Accounting Principles Board

The _________ ________ _________ is the contra asset account used to bring accounts receivable to net realizable value. It is offset by an entry to bad debt expense in an attempt to match uncollectible accounts receivable with the revenue generated by the sales on account. The two methods for estimating a _________ _________ ________ are as follows: Income statement estimation approach (as a percentage of sales) Balance sheet estimation approach based on the aging of accounts receivable (conceptually preferable) Both methods of estimating an allowance for bad debts are acceptable for reporting of results by publicly held companies. However, for tax accounting purposes, the reserve method may only be used for small banks. Nearly all accrual-basis taxpayers must use the specific charge-off method for receivables that become uncollectible. This difference in acceptable methodology results in book-to-tax differences for bad debt expense. It is sometimes also called Allowance for Uncollectible Accounts.

Bad Debt Allowance

An _____________ ____________ ____________ is a document that communicates how the FASB Accounting Standards CodificationTM is being amended; it is not authoritative. It also provides other information to help a user of generally accepted accounting principles (GAAP) understand how and why GAAP is changing and when the changes will be effective.

Accounting Standards Update

The _____________ _____________ is the period of an employee's service to which the expected postretirement benefit obligation for that employee is assigned. It begins with the employee's date of hire (or a later date if specified by the plan) and ends with the employee's full eligibility date.

Attribution Period

SFAC 8.3 ("Qualitative Characteristics of Useful Financial Information") replaced SFAC 2. Feedback value is not a characteristic of relevance in the new concept statement. (See confirmatory value.) _________ ___________ is an ingredient of relevance, the quality of accounting information that helps users to confirm or correct prior expectations by reducing the uncertainty of the outcome of past activities. __________ ______________ serves to provide a point of departure for attempts to predict the consequences of future activities. (SFAC 2.51-.55)

Feedback Value

A _____________ is one who holds a position of trust with respect to another party or its property. It is the ________________ duty to act selflessly for the benefit of another, with undivided loyalty, obedience, and diligence—with due care and in good faith. This is the primary duty of an agent to the principal (although someone who is the agent of another is not necessarily considered a fiduciary for federal income tax purposes), of a trustee to the trust, and of an executor/executrix to the estate.

Fiduciary

____________ _____________ are used to account for assets held by a government unit in a fiduciary or stewardship capacity (e.g., in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds). ____________ ______________ cannot be used to account for resources designated to support the government's own programs. If legally restricted resources are held for a government's own benefit, a permanent fund (one of the governmental fund types) should be used. ___________ __________ use the full accrual basis of accounting. _____________ ____________ information is not included in a government's entity-wide or government-wide financial statements. GASB 1300.102 and 2200.110 ____________ _____________ are: custodial funds, investment trust funds, private-purpose trust funds, and pension trust funds.

Fiduciary Funds

A lessee shall classify a lease as a ________ ___________ and a lessor shall classify a lease as a sales-type lease when the lease meets any of the following criteria at lease commencement: The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

Finance Lease

____________________________________________________ is an independent authoritative body, created in 1973 to replace the AICPA Accounting Principles Board, and authorized by the AICPA Code of Professional Conduct as a promulgator of generally accepted accounting principles (GAAP). The _______________ main purpose is to establish accounting and reporting standards for large, publicly owned corporations whose shares of stock are traded and registered in the United States.

Financial Accounting Standards Board (FASB)

_________ _________ is a federal, state, or local tax based on income (domestic or foreign).

Income Tax

Estimates of future events affecting the amount and timing of pension payments, such as mortality, retirement age, employee turnover, disablement (i.e., changes in employment due to death, retirement, disability, and termination), changes in compensation and discount (interest) rates, used to determine the present value of the pension funding needed, the pension expense, and the pension liability; revised annually.

Actuarial Assumptions

The ____________ _________ _________ is the amount available in cash upon voluntary termination of a life insurance policy by its owner before it becomes payable by death or maturity.

Cash Surrender Value

A _________ is the net realizable value, i.e., estimated selling price in the ordinary course of business less reasonable costs of completion and disposal. It is the upper limit of market in the application of the lower of cost or market pricing principle, and is used to prevent the pricing of the assets at more than the net realizable value.

Ceiling

A "______________________________________________________" is a change in accounting estimate that is inseparable from the effect of a related change in accounting principle. An example of a change in estimate effected by a change in principle is a change in the method of depreciation, amortization, or depletion for long-lived, nonfinancial assets.

Change in Accounting Estimate Effected by a Change in Accounting Principle

A __________ ___________ _______________ is a change that has the effect of adjusting the carrying amount of an existing asset or liability or altering the subsequent accounting for existing or future assets or liabilities. A ____________ ________ ___________ is a necessary consequence of the assessment, in conjunction with the periodic presentation of financial statements, of the present status and expected future benefits and obligations associated with assets and liabilities. ___________ ____________ ____________ result from new information. Examples of items for which estimates are necessary are uncollectible receivables, inventory obsolescence, service lives and salvage values of depreciable assets, and warranty obligations. A change in accounting estimate is accounted for in (a) the period of change if the change affects that period only or (b) the period of change and future periods if the change affects both. A change in accounting estimate is not accounted for by restating or retrospectively adjusting amounts reported in financial statements of prior periods or by reporting pro forma amounts for prior periods.

Change in Accounting Estimates

A ____________ _________ ________ ___________ is a change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. It is expected that accounting pronouncements normally will provide specific transition requirements. However, in the unusual instance that there are no transition requirements specific to a particular accounting pronouncement, a __________ ___________ _________ _________ effected to adopt the requirements of that accounting pronouncement must be reported as a retrospective application of the new accounting principle to all prior periods, unless it is impracticable to do so. Retrospective application requires the following: The cumulative effect of the change to the new accounting principle on periods prior to those presented must be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented. An offsetting adjustment, if any, shall be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period. Financial statements for each individual prior period presented shall be adjusted to reflect the period-specific effects of applying the new accounting principle. A change in the method of applying an accounting principle also is considered a __________ ___________ _________ ____________.

Change in Accounting Principle

A _________ ________ __________ ____________ is a change that results in financial statements that, in effect, are those of a different reporting entity. A change in the reporting entity is limited mainly to (1) consolidated or combined financial statements in place of financial statements of individual entities, (2) changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented, and (3) changing the entities included in combined financial statements. Neither a business combination accounted for by the purchase method nor the consolidation of a variable interest entity pursuant to FASB Interpretation 46R is a change in reporting entity. When an accounting change results in financial statements that are, in effect, the statements of a different reporting entity, the change is retrospectively applied to the financial statements of all prior periods presented to show financial information for the new reporting entity for those periods.

Change in Reporting Entities

In the _________-__________ __________, a policy or course of action is selected from a set of possible or available alternatives. This process is the principal activity of management.

Decision-Making Process

A __________ organization is operated exclusively to: promote social welfare (An organization must operate primarily to further the common good and general welfare of the people of the community, such as by bringing about civic betterment and social improvements.); or promote a religious, testing-for-public safety, educational ,or scientific research purpose; or promote common interests of business organizations and not to engage in activities of a kind ordinarily carried on for profit. The organization may undertake fundraising efforts for which contributions may be tax-deductible to the donor. The entity must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual.

Charitable

____________ ___________ are checks that have not been cashed at the end of the accounting period. They are reconciling items—included in accounting records but not yet included in the bank statement. They must be subtracted from the cash balance per the bank statement during reconciliation.

Checks Outstanding

_________ _________ ___________ is exchange revenue derived from the primary function of the nonbusiness entity, e.g., patient service for a hospital, tuition and fees for a college or university, or membership fees for an art guild or professional society.

Client Service Revenue

__________ consist of works of art, historical treasures, or similar assets that meet all of the following criteria: They are held for public exhibition, education, or research in furtherance of public service rather than financial gain. They are protected, kept unencumbered, cared for, and preserved. They are subject to an organizational policy that requires the use of proceeds from items that are sold to be for the acquisition of new collection items, the direct care of existing collections, or both.

Collections

_________ __________ __________ are the financial statements of a combined group of commonly controlled entities or commonly managed entities presented as those of a single economic entity. The combined group does not include the parent.

Combined Financials Statements

__________ __________ _________ are financial statements of governmental entities reflecting a lower level of aggregation, presenting each fund of each fund type (where a governmental unit has more than one fund of a given type). Combining financial statements are presented in a columnar format, each fund in a separate column and a total column for the fund type. ___________ ___________ in support of the totals column for nonmajor funds appearing in the basic financial statements of a state or local government (SLG) must be included in the financial section of the SLG's Comprehensive Annual Financial Report. The total column in the combining statements would be the same as the nonmajor funds column in the basic financial statements. The combining statements for nonmajor funds are required in each category: governmental, proprietary, and fiduciary.

Combining Financial Statements

The __________ _____________ is the date on which a lessor makes an underlying asset available for use by a lessee.

Commencement Date

___________ are payments to employees, agents, or brokers for selling, purchasing, and collecting services and other business transactions that are usually determined as a percentage of the transaction price.

Commissions

__________ ____________ __________ are a security which, because of the terms or the circumstances under which they were issued (e.g., conversion features, stock rights, ability to share in earnings on virtually the same basis as common stock), is in substance (though not in form) equivalent to common stock and has a dilutive effect (i.e., would cause the potential dilution (decrease) of earnings to each common share outstanding if shares were issued under its terms). Stock options and warrants and stock purchase contracts should always be considered CSE. Convertible debt (bonds) and convertible preferred stock may be CSE if they are dilutive. The determination of whether a security is a CSE should be made only once—at the time of issuance—and should not be changed thereafter.

Common Stock Equivalents

__________ is one of the enhancing qualitative characteristics that enhance the usefulness of information that is relevant and faithfully represented. The enhancing qualitative characteristics also may help determine which of two ways should be used to depict a phenomenon if both are considered equally relevant and faithfully represented. Users' decisions involve choosing between alternatives, for example, selling or holding an investment, or investing in one reporting entity or another. Consequently, information about a reporting entity is more useful if it can be compared with similar information about other entities and with similar information about the same entity for another period or another date. _______________ is the qualitative characteristic that enables users to identify and understand similarities in, and differences among, items. Unlike the other qualitative characteristics, comparability does not relate to a single item. A comparison requires at least two items. Consistency, although related to comparability, is not the same. Consistency refers to the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities. ________________ is the goal; consistency helps to achieve that goal. _______________ is not uniformity. For information to be comparable, like things must look alike and different things must look different. _____________ of financial information is not enhanced by making unlike things look alike any more than it is enhanced by making like things look different. Some degree of comparability is likely to be attained by satisfying the fundamental qualitative characteristics. A faithful representation of a relevant economic phenomenon should naturally possess some degree of comparability with a faithful representation of a similar relevant economic phenomenon by another reporting entity. Although a single economic phenomenon can be faithfully represented in multiple ways, permitting alternative accounting methods for the same economic phenomenon diminishes comparability. SFAC 8.3, QC20-25 ____________ and consistency are qualities of the relationship between two accounting numbers rather than of the numbers themselves.

Comparability

__________ _______ ___________ are financial statements presented together for one or more prior periods as well as the current period. Notes, explanations, and auditor qualifications should be retained to the extent that they continue to be of significance. Any change which affects comparability should be disclosed. Statements for a series of periods are far more significant than those for a single period. They enhance the usefulness of financial reports and show more clearly the nature and trends of current changes affecting the enterprise.

Comparative Financial Statements

In governmental accounting, __________ ___________ are absences for which employees will be paid such as vacation, sick leave, and sabbatical leave. The FASB ASC Glossary adds holidays as an example of absence days for which employees will be paid.

Compensated Absences

A ___________ stock option or plan is a right, awarded to key employees as extra compensation for services or to encourage superior performance, to purchase a specified number of shares of common stock in accordance with an agreement, upon payment of a specified amount (usually at a specified time). It involves the issuance of stock by the corporation and is considered to be compensation (i.e. "income") to the employee usually made available to upper management and key employees only. A ____________ stock option involves two special accounting issues: (1) measurement of the total compensation cost to the employer/grantor (and compensation income to the recipient/grantee) and (2) allocation of the compensation cost to appropriate periods. (Contrast to noncompensatory.) It is generally used to refer to wages or remuneration for an employee's services.

Compensatory

A ___________ depiction includes all information necessary for a user to understand the phenomenon being depicted, including all necessary descriptions and explanations. For example, a ____________ depiction of a group of assets would include, at a minimum, a description of the nature of the assets in the group, a numerical depiction of all of the assets in the group, and a description of what the numerical depiction represents (for example, original cost, adjusted cost, or fair value). For some items, a ____________ depiction also may entail explanations of significant facts about the quality and nature of the items, factors, and circumstances that might affect their quality and nature, and the process used to determine the numerical depiction.

Complete

The AICPA's _________ ________ ___________Rule and Accounting Principles Rule (in the Code of Professional Conduct) refer to compliance with standards promulgated by authorized bodies. __________ _________ ___________ Rule (ET 1.310.001): "A member who performs auditing, review, compilation, management consulting, tax, or other professional services shall comply with standards promulgated by bodies designated by Council." Accounting Principles Rule (ET 1.320.001): "A member shall not (1) express an opinion or state affirmatively that financial statements or other financial data of any entity are presented in conformity with generally accepted accounting principles or (2) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from an accounting principle, promulgated by the bodies designated by Council to establish such principles, that has a material effect on the statements or data taken as a whole. If, however, the statements or data contain such a departure and the member can demonstrate that due to unusual circumstances the financial statements or data would otherwise have been misleading, the member can comply with the rule by describing the departure, its approximate effects, if practicable, and the reasons why compliance with the principle would result in a misleading statement." Simply stated, the __________ _________ ___________ Rule requires all CPAs, regardless of their functional area of service (audit, tax, etc.), to comply with the technical standards issued by those bodies designated by the AICPA to promulgate the technical standards. Any departure from these standards must be justified. A CPA must not allow his or her name, or his or her firm's name, to be associated with the financial statements as if he or she were acting as an independent CPA unless he or she, or his or her firm, has complied with the __________ ___________ ___________ Rule. When a CPA's name is associated with the financial statements, the degree of responsibility he or she is taking with regard to those statements must be clearly indicated so as not to be misleading to the readers. Departures from GAAP are acceptable as long as they are justified. This should not be interpreted loosely. Departures should be made only under unusual circumstances. The only acceptable justification is that, if GAAP were to be followed, the financial statements would be misleading to the readers. Thus, a departure is allowed but must be disclosed and justified.

Compliance with Standards

Neither the FASB nor the GASB has provided a rigorous definition of __________ __________ ___________. The Securities and Exchange Commission (SEC) in Regulation S-X indicates that condensed statements should follow the standard form of financial statements with specified exceptions. The GASB indicates that research and experimentation on designing condensed, summary financial information is ongoing. ____________ ___________ ___________ can add to but not replace information required in annual financial statements.

Condensed Financial Information

The FASB ASC Glossary defines a conditional promise to give as "a promise to give that depends on the occurrence of a specified future and uncertain event to bind the promisor."

Conditional Promise to Give

Financial information has confirmatory value if it provides feedback about (confirms or changes) previous evaluations. (SFAC 8.3, QC9)

Confirmatory Value

A ________ __________ is a legally separate organization for which the primary government's elected officials are financially accountable. A component unit may be a governmental organization not meeting the definition of a primary government, a nonprofit corporation, or a for-profit corporation. If excluding a legally separate organization from the primary government's financial statements would cause the statements to be misleading or incomplete due to the nature or significance of the relationship, then the organization is considered a component unit. A primary government is considered financially accountable for a _________ ____________ if: the _________ __________ is fiscally dependent on the primary government or the primary government either:appoints the voting majority of the _________ __________ governing body or created and has the power to unilaterally abolish the _________ ___________ and that it also either:can impose its will upon or has a financial benefit or burden relationship with the component unit. _________ ____________ financial results may be presented blended with the primary government's financial statements or in discrete format. If the governing body of the primary government also serves as the governing body of the component unit, the _________ __________ financial results are blended as though they are part of the primary government. Blended __________ ____________ are included in the fund-based financial reports as a special revenue fund. Discrete presentation of a __________ ___________ means the __________ _________ information is presented in a separate column on the primary government's government-wide statements. In both cases, users can distinguish between the primary government and the _________ _________.

Component Unit

A ________ _____ ______ _________ comprises operations and cash flows that can be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the entity. A ________ ________ ________ ___________ may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group.

Component of an Entity

_________ _________ __________ is a depreciation method that applies a composite rate of depreciation to a heterogeneous group of assets, such as all the assets in a plant. The composite depreciation rate is based on a weighted-average of the various lives of the assets in the group. It is based on the total carrying amount of the group regardless of the age of each individual asset in the group. No gain or loss is recognized on the disposal or retirement of an individual asset in the group. The computation is composite depreciation expense = the composite depreciation rate × the group total carrying amount.

Composite Life System

___________ is the process of adding interest to principal at periodic intervals, thus establishing a new principal on which the next period's interest is computed, or any growth process achieved in a similar manner. It is an enclosure or a substance formed from other substances or elements. Accountants also use the term compound to describe a journal entry that has either more than one debit and/or more than one credit.

Compound

A __________________________________________(CAFR) is the annual report of the governmental entity, and is composed of the following: Introductory section Financial section, including the following: Auditor's report Management's discussion and analysis (MD & A) Basic Financial Statements and Notes to the statements Required supplementary information other than MD & A Combining financial statements and individual fund statements and schedules Statistical section

Comprehensive Annual Financial Report

Financial records are maintained and reported according to a basis other than GAAP. A comprehensive basis of accounting other than GAAP is one of the following: A basis of accounting that the entity used to comply with the requirements or financial reporting provisions of a governmental regulatory agency to whose jurisdiction the entity is subject (e.g., pursuant to the rules of a state insurance commission) A basis of accounting used to file income tax returns for the period covered by the financial statements The cash receipts and disbursements basis of accounting, and modifications of the cash basis when such modifications are substantially supported, such as recording depreciation on fixed assets or accruing income taxes A definite set of criteria having substantial support that is applied to all items appearing in financial statements, such as the price level basis of accounting See AU-C 800, AU-C 805, and AU-C 806 for examples of the special report used in each instance.

Comprehensive Basis of Accounting (Other Than Generally Accepted Accounting Principles)

_________ __________ is the change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ___________ _________comprises both (1) all components of net income and (2) all components of other __________ __________.

Comprehensive Income

The _________ ___________ is a coherent system of interrelated objectives and fundamentals, designed to lead to consistent standards, which prescribes the nature, function, and limits of financial accounting reporting. It is a series of statements (SFACs) that set forth the fundamentals—objectives and concepts—on which financial accounting and reporting standards are based. It is not intended to directly solve financial accounting problems: objectives give direction, concepts are tools for solving problems. It is intended to guide the FASB (Financial Accounting Standards Board) in the development of Statements of Financial Accounting Standards (SFASs). It does not establish GAAP; therefore, it does not invoke the Accounting Principles Rule (ET 1.320.001) of the AICPA Code of Professional Conduct. Statements of concepts cover: objectives of financial reporting by business enterprises, qualitative characteristics of accounting information (superseded by SFAC 8), objectives of financial reporting by nonbusiness enterprises, recognition and measurement in financial statements of business enterprises, and elements of financial statements.

Conceptual Framework

As included in SFAC 2, ___________ was a guiding accounting constraint, a prudent reaction to uncertainty to try to ensure that uncertainty and risks inherent in business situations are adequately considered. (SFAC 2.91-.97) SFAC 8.3 replaced SFAC 2 and does not include prudence or ____________ as an aspect of faithful representation, because including either would be inconsistent with neutrality. (SFAC 8.3, BC3.27)

Conservatism

___________ is a sales arrangement whereby a third party (consignee) takes possession of goods for the purpose of selling them for the owner (consignor) for a fee; the consignee is the agent of the consignor for the purpose of selling the property. _____________ is a special type of bailment-agency (a fiduciary agency-for-sale relationship). There is no debtor-creditor relationship. The consignee takes possession only, while the consignor retains title (ownership) and risk of loss; however, in order to perfect his interest in the goods, the consignor must do one of the following: Comply with local law providing for posting on the consignee's premises disclosing the consignor's interest. Establish that the consignee is generally known as engaged in selling the goods of others. File under Article 9 as a secured transaction (usually the most practical procedure). Note: Consigned goods are included in the inventory of the consignor on financial statements.

Consignment

____________ is the use of the same accounting principles over time. _____________ refers to the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities.

Consistency

____________ is a reporting procedure in which the financial statements of the parent and the subsidiary are combined. The financial statements are prepared by the parent, not by the subsidiary. ____________ is a reporting procedure only. It does not affect the accounting records of either the parent or the subsidiary. All majority-owned subsidiaries must be consolidated with the parent unless control does not rest with the majority owner (e.g., if the subsidiary is in legal reorganization or bankruptcy).

Consolidation

_________ __________ are dollars of equal purchasing power. To convert historical cost dollars to __________ ___________, the following formula is used: Historical Current Year's Cost Index Constant to Be x ----------------- = DollarRestated Base Year's Index Index This conversion formula is used to convert financial statement values to comparable dollars. The formula is used to convert balance sheet values in the type of inflation accounting called constant-dollar accounting and it is also used in the computations for pricing inventory using the dollar-value LIFO method.

Constant Dollars

The _________ _________ __________ is a monthly index prepared by the U.S. Bureau of Labor Statistics that measures the average change in the typical market basket of goods and services consumed by an average American family—an urban family of four with a median income. This index may also be prepared for a limited geographic area (e.g., Portland, Oregon; the state of Oregon; the Pacific Northwest). The CPI-U is the index used to compute constant dollars when preparing inflation accounting information. This index may also be used to adjust contract prices such as the rent charged for commercial property.

Consumer Price Index

A ____________ is an event or condition that may occur in the future but that cannot currently be predicted. It has an uncertain outcome. The outcome of that event will change an existing condition or resolve a current uncertainty. A _______________ is classified in one of the following three ways: Probable—likely to happen Reasonably possible—may happen, but neither likely nor remote Remote—not apt to occur FASB ASC 450-30-25-1 applies conservatism to a ______________ (losses recognized now and gains when realized). The standard requires that a loss ____________ that is probable and whose amount can be reasonably estimated be accrued by debiting an expense and crediting a liability or a contra asset, as well as disclosing the uncertainty in the notes to the financial statements. If the loss _______________ cannot be estimated but is reasonably possible, it must be disclosed in the notes to the financial statements. If the loss _______________ is remote, then the auditor should document the rationale for this decision and no adjustment or disclosure is required. A gain _______________, on the other hand, is not recorded until the event occurs that establishes the gain.

Contigency

A _________ _____________ is the result of a past condition or event that will be resolved by an event or transaction in the future. The liability is recorded because a contingency is deemed to be probable—likely to happen—and its amount can be reasonably estimated. The liability arises because the expense or loss needs to be accounted for in the current period. A _________ ___________ can sometimes be appropriately referred to as an unidentified liability because the amount is not reasonably estimable or the obligee's identity is not yet certain. Such a "potential (reasonably possible)" liability must be reported, indicating there is no reasonable estimate of cost, but only in a footnote disclosure to the financial statements, not in the body of the statements.

Contingent Liability

Under the concept of continuity, in the absence of evidence to the contrary, the entity is assumed to have an indefinite ("ongoing") life—a life that is sufficiently indefinite and long for the entity to accomplish its objectives and fulfill its legal obligations and that provides the basis for the current/noncurrent balance sheet classification. A business entity that is no longer considered a going concern is assumed to be approaching, or in the process of, dissolution. This assumption is of primary concern to the auditor. An entity in bankruptcy may need to abandon this assumption (and use liquidation accounting) when preparing its financial statements.

Continuity

________ __________ is the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract.

Credit Risk

An item that is _________ is one that is offset or the opposite of another item. In accounting, a ________ account is one whose balance is offset against its related account. Example: The Allowance for Doubtful Accounts is contra to the account Accounts Receivable and the account Bond Discount is contra to the account Bonds Payable. Assets, liabilities, revenues, and expenses can have contra accounts. Asset contra accounts include Allowance for Uncollectible Accounts Receivable, Allowance for Uncollectible Property Taxes Receivable, Accumulated Depreciation, and Accumulated Depletion. The most common liability contra accounts are discount accounts that adjust the carrying value of the liability such as Discount on Bonds Payable. The common revenue contra accounts are Sales Discounts and Sales Returns and Allowances. The common expense contra accounts are Purchase Discounts and Purchase Returns and Allowances.

Contra

A ____________ is an agreement between two or more persons that establishes an enforceable legal relationship between the parties. The essential elements of a contract are: an agreement (offer and acceptance), consideration, valid subject matter, and legal capacity. A void ____________ never had any legal status. A voidable _____________ is valid only until one party exercises a right to void the ____________. An unenforceable _______________ is valid when made but is made unenforceable by some later event, such as the statute of limitations, discharge of the ____________ in bankruptcy, or involuntary destruction of the subject matter.

Contract

A _________ _________ is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity's future performance).

Contract Asset

A ________ __________ is an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.

Contract Liability

_________ __________ is increases in net assets received from outside the corporation, from transactions related to capital stock or donated assets, from financing provided in exchange for ownership interest, and from paid-in capital. Sources of contributed capital: Capital stock at parCommon stockPreferred stock Contributed capital in excess of par (CCEP) Contributed capital from treasury stock Contributed capital from donation of assets

Contributed Capital

The _________ __________ is sales revenue minus all variable costs. (Fixed costs are not considered in calculating _________ __________.) It may be expressed in total, as a ratio, or on a per-unit basis. It results from using variable costing. Total _________ _________ = Total sales - Total variable costs _________ _________ ratio = (P - VC) ÷ P, where P = Unit price and VC = Variable cost per unit _________ _________ per unit = P - VC

Contribution Margin

A ___________ provision is a provision specifying that a debt instrument or preferred stock can be exchanged for (converted into) other securities of the issuing corporation, usually common stock, at the option of the debt holder or stockholder at a specified rate within a specified time period. The conversion rate specifies as a ratio the number of shares of common stock that will be issued upon the conversion of some unit of the convertible instrument or security (e.g., 3:1, three shares of common for each share of preferred or three shares for each $1,000 bond). A __________ provision is an important consideration in the computation of earnings per share. Converted preferred shares are formally retired. A ____________ provision is recorded on the basis of the book value of the converted security.

Convertible

A _________ is an entity that is owed money, goods, or services by another entity (debtor) that is due in the future. The debt may be payable on demand or at some fixed or determinable future date. The debt is often evidenced by a legal document but may arise from a stated or implied contract. The debt may bear interest if it extends over time.

Creditor

A ____________ is an exclusive right granted by law for a specific period of time to make and dispose of copies of a literary, artistic, or musical work. It is also an intangible asset that is identifiable and separable, may be purchased or developed internally, and has a legal life equal to the life of the author (or artist or composer) plus 70 years. The useful life of an intangible asset is defined in FASB ASC 350-30-35-02 as "the period over which the asset is expected to contribute directly or indirectly to the future cash flows of that entity." All relevant information should be considered when estimating the useful life of an intangible asset. FASB ASC 350-30-35-03 lists the following as specific items that should be considered: "The expected use of the asset by the entity. "The expected useful life of another asset or group of assets to which the useful life of the intangible asset may relate. "Any legal, regulatory, or contractual provisions that may limit the useful life. The cash flows and useful lives of intangible assets that are based on legal rights are constrained by the duration of those legal rights. Thus, the useful lives of such intangible assets cannot extend beyond the length of their legal rights and may be shorter. "The entity's own historical experience in renewing or extending similar arrangements, consistent with the intended use of the asset by the entity, regardless of whether those arrangements have explicit renewal or extension provisions. In the absence of that experience, the entity shall consider the assumptions that market participants would use about renewal or extension consistent with the highest and best use of the asset by market participants, adjusted for entity-specific factors in this paragraph. "The effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels) "The level of maintenance expenditures required to obtain the expected future cash flows from the asset (for example, a material level of required maintenance in relation to the carrying amount of the asset may suggest a very limited useful life). As in determining the useful life of depreciable tangible assets, regular maintenance may be assumed but enhancements may not." An intangible asset with a finite useful life should be amortized over its useful life to the reporting entity. There is no arbitrary maximum amortization period. (The 40-year maximum amortization period previously prescribed by APB Opinion 17 was deleted by SFAS 142.) Although SFAS 142 (FASB ASC 350-30-35) may allow an amortization period longer than 40 years, many accountants and managers would question the value of a copyright after 40 years plus the impracticality of delaying the recovery of the investment far into the future. Forty years would still be an allowable period for recovery.

Copyright

A _____________ is a form of business that is a legal entity, separate and apart from its owners. In the United States, corporations may be formed under federal and state law, can sue and be sued, can own property and be taxed, and are responsible for their own debts and torts and the torts of their officers, agents, or employees during the course and within the scope of their corporate duties. Owners (shareholders) are subject to limited liability only (i.e., to the extent of their investment).

Corporation

_________ _____ __________ is a change in an amount reported in previously issued financial statements that was in error due to unintentional mathematical mistakes, mistakes in application of a principle, or oversight or misuse of facts. It is also a change from an accounting principle that is not GAAP to one that is GAAP. It is distinguished from change in accounting estimate. ________ _____ _______ is given retroactive treatment.

Correction of Error

The _______ _______ is a method of accounting for the purchase and resale of treasury stock which uses the one-transaction view—views the purchase and subsequent resale of the shares as one extended transaction with two parts. It uses contra-equity account. The capital stock account is unaffected. It may also affect contributed capital and/or retained earnings and has the same effect on total stockholders' equity as the par value method but does not apportion the amount to the component equity accounts.

Cost Method

_________ _________ (also known as depreciation) is a deduction from gross income for AGI allowed for wear, tear, deterioration, and normal obsolescence of property used in trade or business or held for income production. Acceptable depreciation methods include the following: Straight-line Sum-of-years'-digits Declining balance Other accelerated methods: ACRS, MACRS

Cost Recovery

The _______ ______ _______ _______ is all costs that were included in the value of the units of finished product sold during the period. Beginning finished goods inventory + ________________ = Cost of goods available for sale - Ending finished goods inventory = _______________

Cost of Goods Sold

_________ are sacrifices incurred in economic activities, or that which is given up or foregone to consume, save, exchange, produce, etc. The price paid (usually outlay of cash) to acquire something (a resource) or the expiration of future benefits caused by using a resource to produce something are examples of costs (SFAC 6, footnote 19). _________ may be classified by the following: Traceability to the finished product—direct versus indirect Variability with changes in activity—fixed versus variable Point at which the cost is expensed—product versus period

Costs

__________ is a desirable provision of preferred stock that dividends not declared in a prior year accumulate at the preference rate and must be paid before any dividend can be paid to common stock. Unpaid ___________ dividends are said to have been "passed" and are called "dividends in arrears." Noncumulative stock does not possess this provision. Dividends that are passed (i.e., not declared) for any prior year are permanently lost to the preferred stockholder. Preference is to current-year's dividends only. In general, "__________" refers to the current sum of a series of additions over time, such as the accumulation of annual depreciation or the current total of a sequence of changes to previously reported financial numbers.

Cumulative

__________ __________ is the net dollar impact of a change (the catch-up adjustment). It is the difference between the balance of retained earnings (and individual items) at the beginning of the period in which a change is made and the balance that would have been reported at that same date if the change had been applied in all the prior periods.

Cumulative Effect

_________ ________ are cash and other assets that can be expected to be used, sold, or converted to cash during the current business cycle, generally one year. Examples of _________ _________ include cash, raw materials, trade accounts receivable, and marketable securities.

Current Assets

_________ _________ is one of the attributes used to measure assets and liabilities. It is the amount of cash, or its equivalent, that would have to be paid to acquire currently the same asset. __________ _________ is also known as the replacement cost when used for some inventories.

Current Cost

The FASB defines _____________________________________ as "a method of accounting based on measures of current cost or lower recoverable amount in units of currency, each of which has the same general purchasing power."

Current Cost-Constant Purchasing Power Accounting

The __________ _________ ___________ is the exchange rate at the end of the accounting period. For assets and liabilities, the ___________ _________ _________ is the rate as of the balance sheet date. For revenues, expenses, gains, and losses, the current exchange rate is the rate as of the date on which the element was recognized. (Since revenues and expenses are recognized daily, a weighted average exchange rate for the period can be used.)

Current Exchange Rate

A _________ ___________ is payable within one year, or the operating cycle if longer. It is likely to be paid with current assets or require the incurrence of another ____________ ____________.

Current Liability

________________ ___________ ______________ is one of the attributes used to measure assets and liabilities. It is the amount of cash or its equivalent that could be obtained by selling the asset, and it is used for some investments in marketable securities and liabilities involving marketable commodities.

Current Market Value

In _____________ _____________ of an accounting change: the cumulative effect of the change on the retained earnings at the beginning of the period is recorded. the effect of the change on net income and on related per share amounts should be disclosed. Net income computed on a pro forma basis should be presented on the face of the income statement for all periods presented as if the newly adopted accounting principle had been applied during all periods affected. "Current" means at this point in time, and is used for usual situations of changes in accounting principle. A change in accounting principle is generally accounted for under the retrospective approach. The current approach would only be used if specified in a newly issued authority.

Current Recognition

__________ ___________ are used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private-purpose trust funds. The external portion of investment pools that are not held in a trust that meets the criteria below should be reported in a separate external investment pool fund column, under the ___________ __________ classification. The assets are (a) administered through a trust in which the government itself is not a beneficiary, (b) dedicated to providing benefits to recipients in accordance with the benefit terms, and (c) legally protected from the creditors of the government. The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets. In addition, the assets are not derived from the government's provision of goods or services to those individuals.

Custodial Funds

The _________ _________ is the last day of the accounting period (i.e., the last day of each month or December 31, the last day of the fiscal year). This date (especially the fiscal year-end) is used to test the proper period controls, to test the occurrence assertion, and to test for the occurrence of events subsequent to cutoff which might have a material effect on the financial statements under audit. "Proper cutoff" refers to the appropriate recording of transactions in the proper period, neither delaying some recordings to the next period nor accelerating some next-period transactions into the current-year account balances.

Cutoff Date

A _________ __________ is a clause in a contract that requires one party to do, or refrain from doing, certain things—often, a restriction on a borrower imposed by a lender. The agreement often requires that the borrower should operate within certain limits, typically on debt levels or asset sales.

Debt Covenant

A ______ ______ is any security representing a creditor relationship with an entity. The term debt security includes (1) preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor; (2) a collateralized mortgage obligation (or other instrument) that is issued in equity form but is required to be accounted for as a nonequity instrument regardless of how that instrument is classified (that is, whether equity or debt) in the issuer's statement of financial position; (3) U.S. Treasury securities; (4) U.S. government agency securities; (5) municipal securities; (6) corporate bonds; (7) convertible debt; (8) commercial paper; (9) all securitized debt instruments; and (10) interest-only and principal-only strips. The term ________ _________ excludes option contracts, financial futures contracts, forward contracts, lease contracts, and receivables that do not meet the definition of security and so are not ________ ________ (e.g., trade accounts receivable arising from sales on credit by industrial or commercial entities or loans receivable arising from consumer, commercial, and real estate lending activities of financial institutions).

Debt Securities

________ _________ _________ are governmental funds used to account for the accumulation of resources for and the payment of principal and interest associated with general long-term debt as they come due (mature). Unmatured amounts are not accrued. __________ __________ ________ are accounted for on the modified accrual basis. (GASB 1300.107 and 1600.120) Note: The collection of resources and periodic payments for finance lease obligations may be recorded in a debt service fund but may also be accounted for in the general fund. Finance leases for a proprietary fund would be accounted for in that fund. (GASB L20.118, .120)

Debt Service Funds

The _______-___-_______ _________ is a leverage ratio that measures the relationships between total debt (current and long-term liabilities) to total equity. In other words, debt is expressed as a percentage of total equity or capitalization. When reviewing the results of this ratio, it is important to carefully identify how the two elements have been defined. Debt can be defined as total debt, only long-term debt, total debt excluding deferred income taxes, total debt including redeemable preferred stock, etc. Equity can be defined as total capital including or excluding preferred stock and total debt, stockholders' equity, etc. The computation is Debt ÷ Equity. Obviously, different definitions of debt and equity will change the results of this computation. Issues to be aware of when analyzing this ratio: Since accounting principles require the use of historical costs rather than current value, the equity represented in the balance sheet can be quite different than the market value of assets less liabilities. This problem can be eliminated by restating the assets to market value. Since this information often is not available, another alternative is to use the total of the market value of the outstanding stock in place of the balance sheet stockholders' equity; however, since stock prices can fluctuate between overvaluation and undervaluation, the use of average stock prices over the period of a year can help to eliminate market price error. Some analysts prefer to include preferred stock with total debt since preferred stock holds a preferential position in relation to common stock; however, failure to meet the dividend requirements of preferred stock will not have the same dire effect on the organization as failure to meet interest payments on debt. Therefore, other analysts prefer to include preferred stock with equity. Many analysts prefer to use ending balances to calculate this ratio since the measurement of the risk at a moment in time is desired. Transactions that occur at the end of a period can have dramatic effects on this ratio. This ratio measures the risk contained in the capital structure of an organization. The higher the debt, the higher the risk to outside creditors that interest and principal payments will not be made on a timely basis during a period of declining earnings. One of the limitations of this ratio is that the availability of cash flows needed to meet the interest and principal repayment requirements is not measured. For example, if a long-term debt issue is repaid, the ______-______-_______ _________ will improve; however, the cash available to make interest payments and principal repayments may not change significantly or could even be less than before the repayment. Since the organization's profitability is the most reliable source of cash for interest and principal repayments, the analyst must look beyond the calculation of the _________ _______ ________ to fully understand the risk of the organization.

Debt-to-Equity Ratio

A __________ is an entity who owes either money, goods, or services to another entity (creditor) that is due in the future. The debt may be payable on demand or at some fixed or determinable future date. The debt is often evidenced by a legal document but may arise from a stated or implied contract. The debt may bear interest if it extends over time.

Debtor

A _________ ________ or decision-making authority is an entity or entities with the power to direct the activities of another legal entity that most significantly impact the legal entity's economic performance (according to the provisions of the "Variable Interest Entities" subsections of FASB ASC Subtopic 810-10).

Decision Maker (Decision-Making Authority)

The process of choosing between or among alternative courses of action is decision making. ________ _________ is future-oriented and, in general, for short-run decisions only variable costs, but not all variable costs, are relevant. Fixed costs must be considered when they will be altered by the decision. Relevant factors in the decision-making process include the following: The objective or goal whose achievement is desired (Why is this decision necessary?) The alternative courses of action identified The costs that are relevant to the decision (quantitative factors) Factors that cannot be expressed in dollars (qualitative factors, such as public or employee reaction to the decision)

Decision Making

___________ is concerned with past cash receipts and payments, with prepayments received (collected in advance) or paid. It is the accounting process that recognizes a liability resulting from a current cash receipt or an asset resulting from a current cash payment with deferred recognition of revenues, expenses, gains, or losses until the obligation underlying the liability is partly or wholly satisfied or until the future economic benefit underlying the asset is partly or wholly used or lost. Examples include prepaid insurance and unearned subscriptions. (SFAC 6.141-.152) The major difference between accrual and cash-basis accounting is the timing of the recognition of revenues, expenses, gains, and losses.

Deferral

_______________ is delayed or postponed recognition of revenue or expense until a future period.

Deferred

_____________ _____________- is the portion of an employee's compensation that is payable in the future, either while employed or as retirement benefits, and may result in taxable income for the employee in the future rather than the present. Pension plan benefits, profit-sharing plans, stock bonus plans, bond purchase plans, individual retirement plans (IRAs), and Keogh plan earnings of the current year may be deferred and taxed in the year the payment is received by the employee or self-employed individual. The timing of the taxability depends on whether or not the deferred compensation meets the technical requirements of Subchapter D of the Internal Revenue Code.

Deferred Compensation

____________ ________________ (or liabilities) are long-term obligations (credit balance accounts) usually related to intangibles that are difficult to classify. They are liabilities of the entity and include deferred income liabilities and deferred revenues. (SFAC 6.197)

Deferred Credits

A __________________ is a gain or loss realized on the sale, like-kind exchange, certain capital contributions to corporations or flow-through entities, or involuntary conversion where a gain is realized on an asset but is not recognized in the period of the transaction for tax purposes. A ___________________ is one that will be recognized in the future on the occurrence of a specific event. The mechanism to defer the timing of the gain (or loss) recognition is through adjusting the basis of the replacement asset. Some examples include the following: The sale of an asset on the installment basis: Gain or loss will be deferred and a percentage recognized when each payment is received. The loss on a sale of an asset to a related party: The loss will be deferred until such time that the related party sells the asset for a gain outside of the related-party environment. In an involuntary conversion, if a gain results, all or part of the gain may be deferred if qualifying like-kind property is purchased within the specified time period (normally two years after the end of the tax year in which the realized gain occurs). The __________ __________ (realized gain less recognized gain) reduces the basis of the new property. Tax-deferred exchanges such as those under IRC Section 1031 may result in a __________________. The mechanism to defer the gain or loss is adjusting the basis of the acquired asset. Example: Raston Corporation's office building was destroyed in a fire during 20X1. At the date of the fire, the adjusted basis was $300,000. They received $500,000 from the insurance company based on the fair value at that date. Six months later, Raston purchased a new building costing $600,000. The realized gain is $200,000 ($500,000 - $300,000). Since they reinvested more than $500,000 in a new building, the realized gain is not recognized and is deferred. The new building will have a basis of $400,000 ($600,000 cost less the $200,000 deferred gain). If Raston had reinvested only $450,000, a total of $50,000 of the gain would be recognized ($500,000 realized less $450,000 reinvested) and only $150,000 would be deferred. The basis of the new building would be $300,000 ($450,000 cost less the $150,000 deferred gain). A ___________________ should be contrasted to a nontaxable gain or loss that will never be recognized in the future. _______________________ are temporary. The timing of the recognition is different from the timing of the transaction.

Deferred Gain or Loss

_________ _______ __________ (deferred tax expense) is the amount of future tax expense that is computed independently and does not yet appear on the tax return. It is the net change during the period in the entity's deferred tax liability (asset) and results from changes in the deferred (noncurrent) tax liability (asset) that appears on the statement of financial position until it reverses or is settled. It is added to the current tax expense (computed on the tax return) to give the total tax expense for the period (a residual amount) that is reported on the income statement.

Deferred Income Tax

The _________ __________ was used for determining the deferred tax credit (charge). It specifies the computation of tax expense first (independently) and then computes the deferred income tax credit (charge) as the difference between the computed tax expense and the income tax payable (per the income tax return). Reversal of the deferred tax item is directly related to future revenues, gains, expenses, and losses. It prescribes the use of the current tax rate (i.e., the rate existing when the timing difference originates) to compute the deferred tax credit and the recorded amount of the deferral is not adjusted for subsequent changes in the tax rate. This method does not require that deferred tax liability be discounted (for the time value of money).

Deferred Method

In governmental accounting, ____________ ___________ are a consumption of net assets by the government that is applicable to a future reporting period.

Deferred Outflows

______________ (or unearned or unrealized) ____________ is revenue received currently that is not yet earned and will be recognized in a future period when it is earned. The cash has been received but the product or service has not been provided for the payment received and thus is not yet earned. Prior to recognition as a revenue, it is recorded as an unearned revenue (e.g., Unearned Rent Revenue—rent received in advance, Unearned Subscription Revenue—subscriptions not provided but payment received) or as a deferred credit. The unearned revenue or deferred credit will be reported as either a current liability or a long-term liability, depending on when the revenue will be earned. In governmental accounting, deferral also applies to nonexchange revenues that for whatever reason may not be recognized as revenues of the period in which the related asset (cash or receivable) is first recognized. A deferred inflow of resources is an acquisition of net assets by the government that is applicable to a future reporting period. In governmental accounting, the preferred account title for deferred revenues is "_______________" and not "Unearned Revenue." (GASB Concepts Statement 4.34)

Deferred Revenue

__________ __________ is the amount of future tax consequences attributable to temporary differences that will result in net taxable amounts (deductions) in future years, as computed currently. Recognition and measurement generally does not anticipate the tax consequences of losses or expenses (gains or revenue) that may be incurred (earned) in future years. (Valuation allowances of ________ _________ assets may depend on future estimated income.) ____________ ____________ is generally computed by multiplying the amount of the temporary difference by the current income tax rate (future tax rates if different from the present rates). A ___________ ____________ liability is a credit balance (a future taxable amount) and a deferred tax asset is a debit balance (a future deductible amount). The liability will be paid (asset will be recovered) in future years.

Deferred Tax

__________ __________________ ______________ are the future effects on income tax as measured under the provisions of current tax law resulting from temporary differences at the end of the current year without regard to the effects of future events not yet recognized or inherently assumed in the financial statements.

Deferred Tax Consequences

A ___________ __________ (DB) __________ is a plan that has a formula determining the benefits provided the participants. __________ _________ __________ are usually pension plans, but could include other postretirement plans. A __________ ________ _________ _________ defines the amount of pension benefit to be provided, usually as a function of one or more factors including age, years of service, or compensation (FASB ASC 715-30-05-4). Accounting is difficult because annual expense is based on estimates of future benefits. The employer bears the investment risk and must provide sufficient funds to meet the defined level of benefit. The Employee Retirement Income Security Act of 1974 (ERISA) made funding of defined benefit plans mandatory.

Defined Benefit Plan

A ____________ ___________ (DC) ________ can be a pension, postretirement, or health and welfare plan. According to the FASB ASC Glossary, a ____________ _________ ___________ is "a plan that provides an individual account for each participant and provides benefits that are based on all of the following: "Amounts contributed to the participant's account by the employer or employee "Investment experience "Any forfeitures allocated to the account, less any administrative expenses charged to the plan." A __________ __________ __________ ____________ specifies the amounts contributed to the plan and does not specify the amount of the benefits to be received by the retired employees (FASB ASC 715-70-05-2). Contributions to the plan are based on specified amounts (e.g., 7% of the employee's salary). The benefits to be received by the retired employee are unspecified and uncertain. The employee bears the investment risk and the pension expense is the amount funded (paid in).

Defined Contribution Plan

___________ is the transfer of duties under a contract from the obligor to another party. ____________ does not free the delegating party from liability. _____________ is not anticipatory breach—performance by the delegatee has the same legal effect as performance by the original obligor. Duties are delegable if the performance is standardized and nonpersonal so that it is not important who performs. Performance dependent upon personal services, credit, trust, or confidence cannot be delegated. (Contrast to assignment.)

Delegation

To ____________ is to fix the value of an asset or liability in terms of a specific currency regardless of changes in the exchange rate (e.g., if a domestic company purchases goods on account from a foreign company which are ____________ in foreign currency, then the payable is also ______________ in foreign currency and must be paid in foreign currency, not in dollars, and the transaction is a foreign currency transaction). Contrasted to "measuring" the element: Any asset or liability can be measured in any currency by using exchange rates. However, the right to receive (obligation to pay) a fixed amount of a currency is, by definition, "_______________" in that currency, regardless of the currency in which it is "measured." An asset (liability) which is denominated in a particular currency is a monetary asset, and an asset which is not denominated in any particular currency is a nonmonetary asset.

Denominate

The dictionary definition of the term "_____________" is "revealing or uncovering." In general, the purpose of financial reporting is to reveal an entity's financial information. Often, the term "______________" relates to stating additional facts or explanations in a financial statement or auditor's report. In financial statements, _____________ can be achieved by parenthetical or additional reporting of information after a line item by cross-referencing to another item, by footnotes, and by supplementary verbal and scheduled information. An additional explanatory paragraph can also be added to an auditor's standard opinion for _________ purposes.

Disclosure

__________ is the systematic and rational allocation of the cost of a natural (wasting) resource (e.g., timber, minerals, oil, gas, coal) against revenue earned as the resource is extracted and sold. The depletion method is usually based on units of production. __________ per unit = Capitalized costs ÷ Total estimated units economically recoverable ___________ per unit is revised as the denominator estimate changes. This is a change in the engineering reserves estimate that is accounted for prospectively. ____________ expense = ______________ per unit × Units extracted and sold, current year The units extracted but not sold multiplied by the depletion rate will be included as an asset until sold. In oil and gas tax accounting: For federal income tax purposes, ______________ is computed on each individual unit of property. The allowable _______________ on each property is the higher of cost depletion or percentage depletion. The tax cost _____________ is determined through multiplication of the remaining tax basis by a fraction consisting of the current production as the numerator and the current production plus the estimated future production as the denominator. For federal income tax purposes, percentage depletion is the lesser of a percentage of gross income or 100% of the net income from the property before ___________. The general rule is that 15% will be applied to the gross income in making this comparison. The deduction for percentage _____________ cannot exceed 100% of the taxable income of the taxpayer before the deduction for ______________ under the independent-producer exemption. Percentage depletion is available only to producers not classified as either refiners or retailers (i.e., independent producers and royalty owners). Furthermore, percentage depletion is allowable only on a depletable quantity of up to 1,000 barrels equivalent per day.

Depletion

Examples of ____________ are money or assets temporarily in the custody of another entity, down payments on custom goods or services, and a supply of natural resources, such as coal ___________.

Deposits

_________ _____ __________ are cash amounts that have been added to the accounting records but not yet added to the bank balance (e.g., a deposit made on the last day of the accounting period after the bank had completed the posting of all transactions for the day—the bank will credit the deposit on the next business day, in the entity's next accounting period). They are a reconciling item—included in the accounting records but not yet included in the bank statement. ________ ______ _________ must be added to the cash balance per the bank statement during reconciliation.

Deposits in Transit

___________ ___________ are assets whose acquisition cost is allocated and expensed over its useful life. They usually include all tangible long-lived operational assets. Land is not depreciable; the useful value of land is not "consumed" over time, except for extractive industries. _________ ___________ are subject to depreciation over their useful lives. In the macroeconomic sense, depreciable assets are the part of business earnings/gross profit which is considered the replacement of capital stock used/worn out during the period. It is not included in net profit, and is not a factor payment. It is not a claim on the value of output by a factor of production—represents replacement investment, that amount that must be reinvested to maintain the existing level of capital stock; the amount by which capital contributes to existing level of capital stock; the amount by which capital contributes to current production; a component of GNP (approximately 10%); computed by the income approach to national income accounting; the difference between gross and net investment. In the foreign exchange sense, depreciable assets are the decline in the value of one currency against/in relation to another; devalue. Example: Country A has inflation rate of 5%, Country B of 10%; the goods of Country A become relatively cheaper because the relative prices have changed. Thus: increasing the demand in Country B for Country A's goods. increasing the demand for Country A's currency (to be able to import Country A's goods). decreasing the demand for, i.e., depreciating Country B's currency by 5% (from 10% to 5%).

Depreciable Assets

_________ is the process of systematic, rational allocation of the cost of operational assets to the accounting periods benefited. ____________ is not a process of valuation (FASB ASC 360-10-35-4), does not represent a reserve to replace the asset, and does not mean that cash will be available to replace the asset. _____________ allowed for tax purposes often differs from _____________ allowed for accounting. Accounting _____________ attempts to match the cost of the asset to the revenues generated over the life of the asset. It represents accrual accounting and has no effect on cash flows (a noncash expense). ___________ expense must be added back to accounting income when reconciling to cash from operations using the indirect method. Computation of depreciation requires the following: Acquisition cost Estimated useful life Estimated residual (salvage) value Depreciation method (four GAAP alternatives):Straight-lineSum-of-the-years'-digitsDouble-declining balanceUnits of production—units of product and machine hours Factors which cause the need for depreciation include the following: Physical factors: Wear and tear Effects of time and other elements Deterioration and decay Functional factors: Inadequacy of capacity Obsolescence In the macroeconomic sense, depreciation is the part of business earnings/gross profit that is considered the replacement of capital stock used or worn out during the period. It is not included in net profit and is not a factor payment. (It is not a claim on the value of output by a factor of production.) ____________ represents replacement investment, the amount that must be reinvested to maintain the existing level of capital stock, and the amount by which capital contributes to current production. It is a component of GNP (approximately 10%) and is computed by the income approach to national income accounting. ______________ is the difference between gross and net investment. In the foreign exchange sense, ____________ is the decline in the value of one currency against or in relation to another, in the sense that it now takes more of a particular currency to buy a unit of a foreign currency. Devaluation is the official change in the value of a country's currency. Example: Country A has an inflation rate of 5% and Country B has an inflation rate of 10%. The goods of Country A become relatively cheaper because the relative prices have changed, thus: increasing the demand in Country B for Country A's goods, increasing the demand for Country A's currency (to be able to import Country A's goods), and decreasing the demand for (i.e., depreciating) Country B's currency by approximately 5% (10%-5%).

Depreciation

A ____________ instrument is a financial instrument or other contract with all three of the following characteristics: It has (1) one or more underlyings and (2) one or more notional amounts or payment provisions, or both. Those terms determine the amount of the settlement or settlements and, in some cases, whether or not a settlement is required. It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. Its terms require or permit net settlement, it can readily be settled net by a means outside the contract, or it provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement.

Derivative

___________ ___________ are the gains (losses) and the operating results from discontinuing a business segment. The business segment must be a separate line of business or class of customers. To be reported as __________ _____________, a disposal must represent a strategic shift—which has a major effect on the entity's operations and financial results. Example: Disposal of the manufacturing assets for shoes in Maine, but continuing to manufacture shoes in Italy is a discontinued segment only if the sale represents a substantial portion (20% or more) of the entity's assets. Discontinuing the manufacture of shoes and continuing to manufacture mobile homes is the discontinuance of a separate line of business. Discontinuing sales to customers in Europe and continuing sales in the United States is not a ___________ ___________, but discontinuing selling products retail throughout the world and continuing to sell products wholesale is a discontinuance of a separate class of customers. To qualify as a ____________ __________, the assets, results of operations, and activities of the business segment must be clearly distinguishable from the other business activities. The results of ___________ ___________ are reported separately net of the related income tax expense following operating income. The reporting varies depending on when management commits itself to dispose of the segment (the measurement date) and when the actual disposal occurs (disposal date): The operating results (revenues and expenses) from the beginning of the period included in the income statement to the measurement date are reported as the gain (loss) from operation of a discontinued segment net of income taxes. This includes not only the current year, but all the prior years included in the income statement with each in the year realized. If the measurement date and the disposal date are either the same date or are within the same year, the segment's operating results from the measurement date to the disposal date and the gain (loss) from the disposal of the net assets of the segment are summed and reported as either the gain or loss on disposal net of income taxes. The amount of operating results and the amount of gain (loss), however, are disclosed in the description of the disposal. If a time lag (phaseout period) exists between the measurement date and the disposal date, two types of phaseout periods can occur in the same accounting period and extending over two or more accounting periods (extended phaseout period). If an extended phaseout period occurs, FASB ASC 205-20 applies conservatism to the reporting of the sum of the realized and estimated unrealized operating results and realized and estimated unrealized gains and losses on disposal of the net assets. During the phaseout period, if the sum of all the realized and unrealized amounts is a gain, the net gain is recognized when realized net of income taxes. Realized operating results and realized gains and losses are therefore recognized in the year they occur.

Discontinued Operations

A _________ is the excess of face value over the proceeds (cash paid) for a bond (i.e., the borrower receives proceeds less than the face value), which is contrasted to a premium. A _____________ results when the stated interest rate is less than the effective (market) rate. It is amortized over the life of the bond with the amount of amortization reported as interest and is the difference between the present value of the bond and its face value (where the face value is higher). The __________ is recorded on the balance sheet as a contra account inseparable from the bond which gives rise to it. It must be disclosed as a direct deduction from the face amount of the bond. Example: A bond at face value is a $1,000, 20-year bond bearing interest at 10% annually, where the stated interest rate is 10% and cash interest paid is $100 per year. (FASB ASC 835-30-55-5) If the prevailing market rate is 12%, the bond will "sell" for less than $1,000 (proceeds received will equal $851), because the lender could earn 12% on any other investment (so this bond's market value is less than its face value). The bond sells at a discount. i=.12, n=20, PVA(100) = (PVA x 100) + (PV x 1,000) = (7.47 x 100) + (.104 x 1,000) Selling price = $747 + $104 = $851 ___________ = $1,000 - $851 = $149 The measure of the time value of money (present value), the amount deducted in advance of a payment due (as a cash discount on a receivable for early payment) or an amount charged in advance and deducted from the amount due (as a discounted or noninterest-bearing bond), and the process of decreasing a future amount back to the present at a specific discount rate (i) are all examples of ways in which the term "____________" is used.

Discount

A _________ __________ is the rate of interest used to compute the present value of future cash flow(s). FASB ASC 835-30 requires that the interest rate be the borrower's rate for an arm's-length transaction in which you have a willing buyer and a willing seller and neither is compelled to buy or sell. In other cases, the rate of interest used is the prime rate, an opportunity cost rate, an investment rate of return, a weighted average cost-of-capital rate, etc.

Discount Rate

For a lessee, the ________________________ is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the lessee is required to use its incremental borrowing rate. For a lessor, the _____________________ is the rate implicit in the lease.

Discount Rate for the Lease

__________ __________ ___________ is forecasted future cash flows, discounted (at an appropriate rate) to reflect present value. This is one method used in business valuation. Because this method involves financial forecasts, it is not widely used in valuing small businesses. When using financial forecasts, the practitioner needs to follow AICPA guidelines for prospective financial information.

Discounted Cash Flow

The ___________ is usually the principal underwriter that sells the fund's capital shares by acting as an agent (intermediary between the fund and an independent dealer or the public) or as a principal, buying capital shares from the fund at net asset value and selling shares through dealers or to the public.

Distributor

_____________ are the distributions of cash, other corporate assets or property, or the corporation's own stock to stockholders in proportion to the number of outstanding shares held. Accounting for dividends represents a debit to retained earnings and the establishment of a liability at the date of declaration. _____________ must meet the preferences of preferred stock first and then may be extended to common stock. There are two types of ______________: Common, such as cash, stock (treasury or newly issued shares), and property Special, such as scrip and liquidating Four dates are relevant to dividends: date of declaration, record, ex-____________, and distribution (payment). Date of declaration is the date whereby the ____________ amount is decided by the board of directors for those shareholders owning stock on the date of record (usually 1 month later) and to be paid on the date of distribution. Ex-______________ date is a date prior to the date of record (see ex-dividend date).

Dividend

The _________ ___________ is the per share amount set by a corporation's board of directors to be paid to stockholders. The sum of these per share amounts (_________ _________) is recorded in a nominal (temporary) retained earnings account, __________ ___________, on the date (date of declaration) that the corporation's board of directors decides to pay the dividend because at that point in time it becomes a legal liability of the corporation. The dividend can be cash, other assets, or the corporation's own preferred or common stock.

Dividend Declared

________ _________ are funds that may be used to account for any activity of a governmental unit for which a fee is charged to external users for goods or services. __________ ___________ must be used when fund net revenues secure debt or if law or pricing policies require fund expenses, including capital costs (depreciation) to be covered by revenues. __________ ____________ are financed and operated in a manner similar to commercial (business) activities (e.g., utilities, swimming pools). __________ __________ are accounted for on the accrual basis with accounts for all related assets and liabilities, including capital assets and long-term debt. Fund equity (fund net position) is reported in three categories: net investment in capital assets, restricted, and unrestricted.

Enterprise Funds

A corporation may deduct, within certain limits, 50% of the dividends received if the corporation receiving the dividend owns less than 20% of the distributing domestic corporation. In other circumstances, a corporation may deduct (within certain limits) 65% of the dividends received if it owns 20% or more, but less than 80%, of the paying domestic corporation. This corporation is referred to as a 20%-owned corporation. A small business investment company can deduct 100% of its dividends received. Ownership is determined, for these rules, by the amount of voting power and value of stock (other than certain preferred stock) the corporation owns. Members of an affiliated group of corporations (at least 80% owned by the parent) may deduct 100% of the dividends received from a member of the same affiliated group if they meet certain conditions. See IRC Section 243 for the definition of an affiliated group of corporations. When a corporation receives a dividend from a domestic corporation in the form of property other than cash, it includes the dividend in income. The amount included is the lesser of the property's fair market value or the adjusted basis of the property in the hands of the distributing corporation, increased by any gain recognized by the distributing corporation on the distribution. In addition to dividends received from domestic corporations, the above rules apply to dividends received from a foreign corporation that are paid out of the earnings and profits of a taxable domestic predecessor corporation. Corporations cannot take a deduction for dividends received from the following: A real estate investment trust or regulated investment company (mutual fund) A corporation exempt from tax either for the tax year of the distribution or the preceding tax year A corporation whose stock has been held by the taxpayer corporation for 45 days or less A corporation whose stock has been held by the taxpayer corporation for 90 days or less, if the stock has preference as to dividends and the dividends received on it are for a period or periods totaling more than 366 days Any corporation, if the taxpayer corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments for positions in substantially similar or related property Other specific limitations to the deduction may also apply. The Taxpayer Relief Act of 1997 (TRA '97) added the requirement that all dividends received during the tax year must meet the requirements of items 3 or 4 for all of the dividends of a specific corporation to qualify for the dividends-received deduction. The _________ _________ ___________ helps reduce the potential for triple taxation, where earnings would be taxed by the corporation that originally earns them, by the corporation that receives them as dividends, and by the stockholder who receives them as dividends from the second corporation.

Dividend Recieved Deduction

___________ ___ ___________ are undeclared and unpaid cumulative dividends on preferred stock and are said to have been "passed." They must be disclosed in the notes to the financial statements. (They do not represent a liability because they are not an enforceable obligation until declared by the board of directors.) _________ ____ _________ must be deducted from net income in earnings per share computations (on common stock).

Dividends in Arrears

A _________ _________ ____________ is a donor stipulation (donors include other types of contributors, including makers of certain grants) that specifies a use for a contributed asset that is more specific than broad limits resulting from the following: The nature of the not-for-profit entity (NFP) The environment in which it operates The purposes specified in its articles of incorporation or bylaws or comparable documents for an unincorporated association Some _________ _______ __________ that are temporary in nature; for example, stipulating that resources be used after a specified date, for particular programs or services, or to acquire buildings or equipment. Other ___________ _________ __________ that are perpetual in nature, for example, stipulating that resources be maintained in perpetuity. Laws may extend those limits to investment returns from those resources and to other enhancements (diminishments) of those resources. Thus, those laws extend ___________ _______ ____________.

Donor Imposed Restrictions

A _____________________________ is created by a donor stipulation (donors include other types of contributors, including makers of certain grants) requiring investment of the gift in perpetuity or for a specified term. Some donors or laws may require that a portion of income, gains, or both be added to the gift and invested subject to similar restrictions. The term does not include a board-designated endowment fund.

Donor Restricted Endowment Fund

_________ ________ ____________ is donor-restricted revenues or gains from contributions that increase net assets with donor restrictions. (Donors include other types of contributors, including makers of certain grants.)

Donor Restricted Support

__________ __________ ___________ (200% declining balance) is an accelerated depreciation method that applies a rate double that of straight-line (originally based on the method used for tax purposes). It is based on the assumption that the productivity or revenue-generating power of the asset is relatively greater during the earlier years of its life, or that maintenance expenses tend to increase during the later years. It produces results similar to the sum-of-the-years'-digits method. The computation is double the straight-line (SL) rate times the carrying amount of the asset: DDB depreciation expense = 200% SL rate × Carrying amount Depreciation is discontinued when the carrying amount equals the residual value. Declining balance can also be applied at a different rate, e.g., 150% of straight-line.

Double Declining Balance

A _________ ________ feature is a feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument, or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument. A __________ ___________ feature may reduce the strike price of a financial instrument to the current issuance price, or the reduction may be limited by a floor or on the basis of a formula that results in a price that is at a discount to the original exercise price but above the new issuance price of the shares, or may reduce the strike price to below the current issuance price. A standard antidilution provision is not considered a down round feature.

Down Round

"______ ______" and "______ _______" are customary account titles for payables to/receivables from other governmental units and/or other funds within the same governmental unit.

Due to and Due from Accounts

Income is _________ when the entity has substantially completed what it must do to be entitled to the benefits represented by revenues, related expenses can be reasonably estimated, and collection is reasonably assured. Activities that give rise to revenues include purchasing, manufacturing, selling, rendering service, delivering goods, allowing other entities to use enterprise assets, and the occurrence of an event specified in a contract.

Earned

_________ ________ _____________ (EPS) is, generally, the allocation of a pro rata share of income to each share of common stock (EPS is not computed on preferred stock). It is a comparison of net income of an enterprise with the average number of common shares outstanding during the year. The Financial Accounting Standards Board (FASB) has established this definition in FASB ASC 260-10-45. The required reporting for public companies is basic EPS and diluted EPS. The standard is required for all interim and annual reports ending after September 15, 2009. FASB ASC 260-10 applies to all entities that have issued common stock or potential common stock that trades in a public market. Potential common stock consists of other securities and contractual arrangements that may result in the issuance of common stock in the future, such as options, warrants, convertible securities, and contingent stock agreements. Corporations with simple capital structures are required to report only basic earnings per share. Corporations with complex capital structures are required to report basic earnings per share and diluted _______ ________ ___________. A simple capital structure is one that consists of capital stock and includes no potential for dilution via conversions, exercise of options, or other arrangements. A complex capital structure would include convertible bonds or preferred stock, outstanding options or warrants, and any contractual arrangement that would include the issuance of new shares. Basic EPS measures the performance of an entity over the reporting period based on its outstanding common stock. The calculation is to divide the income attributable to common stock by the weighted-average number of common shares outstanding. Diluted EPS measures the performance of an entity over the reporting period based on its outstanding common stock while giving effect to all dilutive potential shares that were outstanding. The calculation includes income attributable to common stock plus adjustments resulting from the issuance of dilutive potential common shares. This adjusted income figure is divided by the weighted-average number of common shares outstanding increased by the dilutive potential common shares.

Earnings Per Share

An __________ __________ is a not-for-profit entity's (NFP's) interest in another entity that exists if either of the following criteria are met: (1) the other entity holds or utilizes significant resources that must be used for the purposes of the NFP, either directly or indirectly by producing income or providing services; or (2) the NFP is responsible for the liabilities of the other entity.

Economic Interest

The _______________________________ is the date that a lease modification is approved by both the lessee and the lessor.

Effective Date of the Modification

________ _______ is yield on a debt instrument as calculated from the purchase price. The effective rate on a bond is determined by the price paid for the security, the coupon rate, the time between interest payments, and the time until maturity.

Effective Interest

The ________ _________ ____________ is the required method under GAAP for accounting for bond discounts or premiums. Interest expense is the carrying value of the bonds multiplied by the effective interest rate. Bond or premium amortization is the difference in interest expense and cash interest paid.

Effective Interest Method

The __________ _________ ___________- is the rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial asset. For purchased financial assets with credit deterioration, however, to decouple interest income from credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition.

Effective Interest Rate

______________ are commitments related to unperformed (executory) contracts for goods and services. They are recorded in the General and other governmental funds for budgetary control purposes to prevent overspending and demonstrate compliance with legal requirements. An encumbrance does not represent either expenditures or liabilities—it represents the estimated amount of expenditure which will result if unperformed contracts (purchase orders) in process are completed. (GASB 1700.127) A debit to ____________ is offset by a credit to Fund Balance: Reserve for ____________. When the contract is completed (the goods or services have been received), the _____________ entry is reversed and the expenditure is recorded. The ______________ entry is also removed at year-end and a portion of the Fund Balance is labeled "committed" or "assigned" unless there is already a portion of the Fund Balance labeled "restricted" regarding the specific commitment represented by the original Encumbrance. For budgetary control: Unencumbered appropriations = Appropriations - Expenditures - _____________.

Encumbrances

An __________ __________ is an established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit entity (NFP). The use of the assets of the fund may be with or without donor-imposed restrictions. __________ ___________ generally are established by donor-restricted gifts and bequests to provide a source of income in perpetuity or for a specified period. Alternatively, an NFP's governing board may earmark a portion of its net assets as a board-designated __________ __________.

Endowment Fund

Every governmental entity should prepare a comprehensive annual financial report encompassing all activities of the primary government, including blended component units, without displaying funds and excluding information about fiduciary activities. These are the ________-_______- or government-wide financial statements. ________-_______ statements are often called "government-wide statements."

Entity-Wide

________ is ownership interest. It is the residual interest in the business entity that remains after deducting its liabilities. _______ is affected by all events that increase or decrease total assets by a different amount than they increase or decrease total liabilities. SFAC 6.49-.65 and 6.212-.214 Distinctions within ________ (common, preferred, etc.) are matters of presentation and display, not of definition. ________ stems from ownership rights and involves a relation between the enterprise and its owners as owners rather than as employees, lenders, suppliers, customers, or other nonowner roles. Stockholders, partners, proprietors, investors, and participants are also terms used in defining owners. The distinction between liability and ________ depends on the nature of the claim, not the identity of the claimant—_________ ranks after liabilities as a claim to or interest in the assets of the enterprise (the residual interest). Generally, the enterprise is not obligated to transfer interest to owners except under liquidation. Distributions to owners are at the discretion of the owners or their representatives. The distinguishing characteristic of the _________ of a business (compared to the _________ of not-for-profit entities, termed "net assets") is that it may be increased through investments by owners and decreased by distributions to owners. See SFAC 6.64-.65 for details regarding changes in _________.

Equity

The ________ ___________ is a special accounting treatment for investments in equity securities used only when the investor: can exert significant influence or control over the investee (usually with majority—greater than 50%—ownership) and does not consolidate the financial statements of the subsidiary. The _________ _________ views the investee as a part of the investor (related entities). (FASB ASC 323-10-25-2) The investor records the investment at acquisition cost (fair market value on the date of acquisition) and adjusts the carrying amount (increase/decrease) to recognize the investor's share of the earnings/losses of the investee (whether distributed to the investor or not). The adjustment is also recognized as a determinant of net income of the investor in proportion to the investor's ownership in the investee. Both are eliminated in consolidated financial statements. Dividends received from the investee reduce the carrying amount of the investment. Investment at acquisition = Cost Investment = Cost + Share of earnings - Share of Dividends - Adjustments to after-acquisition income of investee Investment revenue = Share of earnings - Adjustments to income of investee Note: The _________ _________ and consolidation give the same result in the financial statements of the investor. The Securities and Exchange Commission (SEC) requires reporting public corporations to use the ________ _________ for all investee corporations owned 20% or more (exception may be made where owner does not control the corporation).

Equity Method

Definition 1: An _________ _________ is any security representing an ownership interest in an entity (for example, common, preferred, or other capital stock) or the right to acquire (for example, warrants, rights, forward purchase contracts, and call options) or dispose of (for example, put options and forward sale contracts) an ownership interest in an entity at fixed or determinable prices. The term equity security does not include any of the following: Written equity options (because they represent obligations of the writer, not investments) Cash-settled options on equity securities or options on equity-based indexes (because those instruments do not represent ownership interests in an entity) Convertible debt or preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor Definition 2: An __________ ___________- is any security representing an ownership interest in an entity (for example, common, preferred, or other capital stock) or the right to acquire (for example, warrants, rights, forward purchase contracts, and call options) or dispose of (for example, put options and forward sale contracts) an ownership interest in an entity at fixed or determinable prices. However, the term does not include convertible debt or preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor.

Equity Security

An _____________________________________ is an error in recognition, measurement, presentation, or disclosure in financial statements resulting from mathematical mistakes, mistakes in the application of GAAP, or oversight or misuse of facts that existed at the time the financial statements were prepared. A change from an accounting principle that is not generally accepted to one that is generally accepted is a correction of an error. Any ____________________________ of a prior period discovered subsequent to their issuance is reported as a prior-period adjustment by restating the prior-period financial statements. Restatement requires the following: The cumulative effect of the error on periods prior to those presented is reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented. An offsetting adjustment, if any, is made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period. Financial statements for each individual prior period presented are adjusted to reflect correction of the period-specific effects of the error.

Error in Previously Issued Financial Statements

__________ ________ _________ is the valuation of an asset at present worth. Current value, as opposed to book value or historical cost, is a more realistic presentation of an asset's true worth, which is why it is sometimes preferred, and even in some instances required, as for personal financial statements (per FASB ASC 274-10-20). Since an asset's true present worth, or current value, cannot always be known with 100% certainty until it is sold, at which time the price received determines its worth, current value for an asset held must be estimated based on the most reliable source available for that asset. Theoretically, the estimated current value of an asset is the value a willing buyer and a willing seller would agree is a fair and reasonable price when each is well informed, willing, and not compelled to buy or sell. It is the fair market value from an unforced arm's-length transaction. ___________ __________ ______________ for an asset being held will therefore be based upon an expert appraiser's best judgment, published market prices, recent transactions involving similar assets, specific price indexing of the historical cost, discounted cash flows using market rates of interest, or some other reliable source or basis most appropriate to the asset.

Estimated Current Value

___________ ____________ is the budgetary control account for total sources of revenue used by governmental units in recording their budgets. The budgetary entry debits __________ _____________ and credits Appropriations and Estimated other financing uses, and the difference between those debits and credits is debited or credited to Budgetary fund balance. At the end of the accounting period, this budgetary entry is reversed. The use of the budgetary account ___________ ___________ provides control over anticipated revenues and permits the comparison of actual revenues to budgeted revenues.

Estimated Revenues

________ are the basic tenets that guide performance of professional responsibilities. The Code of ________ was established by the AICPA to "express the profession's recognition of its responsibilities to the public, to clients, and to colleagues." They are "principles for honorable behavior, even at the sacrifice of personal advantage" and apply to all members of AICPA. Departures from the Rules must be justified. The Code of _______- provides the basis for the self-regulation of the accounting profession and guides the behavior of all CPAs, regardless of the area of practice, in the performance of professional services. The Principles are broad guidelines that provide the framework for the Rules. The Principles do not represent rules that must be followed and for which disciplinary action can be taken, but are the spirit behind the rules. They set the tone, the aspirations, and the ideals. The Rules establish the fundamental behavior of a CPA professional. They are the minimum acceptable level of conduct. They form the basis for disciplinary action. The Interpretations of Rules of Conduct are useful as guidelines on the scope of the rules. They answer many applicability questions. They are not enforceable, but deviations must be justified. The _______ Rulings are formal rulings made by the Professional Ethics Division's Executive Committee. They are presented as factual questions and answers. Departures in similar circumstances need to be justified. Note: Justice Potter Stewart defined _________ as "knowing the difference between what you have the right to do and what is right to do."

Ethics

The ________-_________ __________ is the date when the buyers of shares of a specific stock will no longer receive the next dividends of the stock they purchase. During the time between the date of announcement and the ______-________ __________, the market price of the stock includes the dividend. Subsequent to the ______-________ __________, the market price does not include the dividend because the subsequent stock owner will not receive the dividend. Since the transfer of ownership takes some time, major stock exchanges specify an ex-dividend date several days prior to the date of record. For example, the _____-_________ __________ on the New York Stock Exchange is 3 business days before the date of record. (Compare to dividends.)

Ex-Dividend Date

________ _____/______ is the changes in the values assigned to assets and liabilities as a result of fluctuations in the value of a foreign currency relative to the domestic currency. It can result from the transaction or the gain or loss resulting from the cash flow upon settlement of the transaction, for example, changes in the values of receivables or payables between the date of billing and the date of payment due to fluctuations in the exchange rate or the translation (converting amounts expressed in the functional currency into the reporting currency). __________ _______/________ result from the "two-transaction" perspective that FASB ASC 830-20 uses: The sale or purchase transaction (an "operating" decision) is separate and distinct from the risk assumed on the open receivable/payable denominated in a foreign currency (a "financing" decision). Examples of ________ _______ ______ ___________ are as follows: Purchased goods denominated in Foreign Currency (FC) cost 10FC (i.e., the purchaser must pay the amount owed in FC, not in dollars). On the billing date, the exchange rate is 1FC = $0.20, so the payable, measured in domestic currency, is valued at $2. In order to settle the payable, the debtor must "buy" 10FC.If at the payment date 1FC = $0.25, then it will "cost" $2.50 to pay the 10FC owed, resulting in an exchange loss of $0.50 for the transaction.If the payable still exists at the end of the accounting period when the exchange rate is 1FC = $0.25, a transaction exchange loss of $0.50 also results. The domestic entity has a subsidiary in the country which uses FC as the functional currency and the subsidiary has a payable on its balance sheet valued at 10FC. When the payable of the subsidiary is translated into dollars for consolidation with the parent when the exchange rate is 1FC = $0.25, the translation loss of $0.50 must be recognized by the domestic (parent) entity.

Exchange Gain/Loss

__________ _______ is the ratio between a unit of one currency and the amount of another currency for which that unit can be exchanged at a particular date. It is the amount of one currency that is equal to and convertible into another currency at a particular point in time. It is the "price" of one currency in terms of another. __________ ___________ is the relative values of two currencies. (FASB ASC 830-10-20) An _________ ___________ may be stated: directly: one unit of the foreign currency (FC) is stated in terms of the domestic currency, or indirectly: one unit of the domestic currency is stated in terms of the foreign currency. These are reciprocals of each other: 1 FC = 4 FC ------ ------ $.25 $1 Factors that affect exchange rates include: changes in taste (i.e., demand for each nation's goods), changes in relative income, changes in relative prices (determined by the respective inflation rates of each nation), changes in real interest rates, and speculation.

Exchange Rate

___________ __________ are "ownership costs" such as insurance, maintenance, and taxes incurred for the leased property. The economic burden of __________ _________ typically falls on the lessee even though cash for the payment of ___________ ___________ may be handled in two ways. First, cash may flow from the lessee directly to, for example, a taxing authority. In this instance, the lessee "pays" the _______ _______. Second, cash may flow from the lessee to the lessor as part of the periodic rental payment. The lessor then "pays" the _______ __________. The lessor may make a profit for handling the payment of __________ ___________ for the lessee this way. This profit is also considered an __________ ___________.

Executory Costs

The _________ ________ is the price that would be received to sell an asset or paid to transfer a liability.

Exit Price

The __________ _________ __________ is the probability-weighted average (that is, mean of the distribution) of possible future cash flows.

Expected Cash Flow

"__________" is a term used in governmental fund accounting that refers to a decrease in (use of) the financial resources of the entity. __________ are recorded under the modified accrual basis (current financial resources measurement focus) when the related liability is incurred, if measurable, except for unmatured interest and principal on general long-term debt, which should be recognized when due. GASB 1600.116 and 1600.120 (Compare to expense, as used in accrual accounting for proprietary funds and business enterprises.) ____________ should be classified by fund, function (or program), organization unit, activity, character, and principal classes of objects

Expenditures

An _________ is the outflow or other using up of assets or incurring of liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations (SFAC 6.80-.81). __________ are recorded under the accrual method of accounting, in government called the "economic resources measurement focus."

Expenses

An ________ __________ results from an expenditure that has no expected future benefit or whose benefit has been exhausted. It is any cost that has been recognized and charged to the income statement. An _________ __________ has been absorbed in the period when its benefit has been enjoyed or when a loss (of its value) was incurred.

Expired Cost

___________ ________ _____________ is a transaction in which the debtor is relieved of debt in one of two ways (FASB ASC 405-20-40-1): The debtor pays the creditor and is relieved of all obligations with respect to the debt. This includes the debtor's reacquisition of its outstanding debt securities in the open market. The debtor is legally released from being the primary obligor under the debt, either by court order or by the creditor. Debt may be extinguished by direct cash payment to creditors, exercise of a call privilege by the issuer, purchase in the open market by the issuer, refunding (retirement of old debt by issuing new debt), and in-substance defeasance.

Extinguishment of Debt

In governmental accounting, ___________ _________ are gains and losses that are both unusual in nature and infrequent in occurrence. These are reported separately at the bottom of the statement of activities. (GASB 2200.143) The following are some ___________ _____________: A major casualty loss such as an earthquake An expropriation Prohibition under a newly enacted law or legislation Under GASB 2200.146, early extinguishment of debt is considered extraordinary only if it meets the criteria of GASB 2200.147-.148 (both unusual in nature and infrequent in occurrence). The following are items that are normally not considered extraordinary: Write-downs or write-offs of receivables, inventory, equipment, or intangible assets Gains or losses from exchange or translation of foreign currencies Effects of a strike Adjustments of accruals on long-term contracts

Extraordinary Items

The Accounting Standards Codification (ASC) is the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority.

FASB Accounting Standards Codification

The __________________ ___________ (or face value) is specified (printed, stamped, or marked) on the note or bond that will be collected or paid at maturity. Face value equals the principal amount of an interest-bearing note or the face amount of a bond. It is more than the principal in a noninterest-bearing note.

Face Amount

___________________________________ is a method of short-term financing in which a business sells its accounts receivable (AR) for cash, transferring the right to collect on them to the factor. It is a transfer arrangement whereby a business can receive cash in advance of collection of its accounts receivable by selling them at a discount, the difference being interest expense or a loss. The factor (the institution that buys the AR) assumes the duties of invoicing and collecting, with the customers making their payments directly to the factor, and of the credit approval process. The credit approval process may be on a with recourse or without recourse basis. The amount of AR that is factored must be disclosed. The accounting may be treated as a borrowing transaction or as a sale, depending on the terms.

Factoring of Accounts Receivable

The fair value of an investment is the amount that the asset could reasonably expect to receive for it in a current sale between a willing buyer and a willing seller, that is, other than in a forced or liquidation sale. Fair value shall be measured by the market price if there is an active market for the investment. If there is no active market for the investment but there is a market for similar investments, selling prices in that market may be helpful in estimating fair value. If a market price is not available, a forecast of expected cash flows, discounted at a rate commensurate with the risk involved, may be used to estimate fair value. The fair value of an investment shall be reported net of the brokerage commissions and other costs normally incurred in a sale. FASB ASC Glossary For tax purposes, the fair market value is usually referred to as the sale price between a willing seller and a willing buyer when neither is compelled to buy or sell.

Fair Market Value

___________ ___________ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date.

Fair Value

A ____________ ____________ ______________ is a hedge of changes in the fair value of recognized assets, liabilities, or unrecognized firm commitments that are attributable to a particular risk.

Fair Value Hedge

The _________________________________________________ (or the fair value option for financial assets and financial liabilities) permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.

Fair Value Measurement Option

Fair market value of leased property is the price at which the property could be sold between unrelated parties in an arm's-length transaction. Fair market value for a lessor who is a manufacturer is usually the normal selling price of the property at the inception of the lease. However, depending on market conditions, fair market value may be less than the normal selling price or may be even less than the cost of the property. Fair market value for lessors who are not manufacturers will ordinarily be the property's cost less any volume or trade discounts. However, when significant time has passed between when the property was purchased and the inception of the lease, market conditions may indicate that fair market value is greater or less than the property's cost or carrying amount at the inception of the lease.

Fair Value of Leased Property

The ________________________________ is the amount that a pension plan could reasonably expect to receive for an investment in a current sale between a willing buyer and a willing seller. The plan investments are usually securities, stocks, and bonds paid for by employer plan contributions. The investments are held by a trustee and maintained in order to pay benefits to retirees.

Fair Value of Plan Assets

Financial information must faithfully represent the phenomena that it purports to represent. To be a perfectly faithful representation, a depiction would have three characteristics: Complete Neutral Free from error Of course, perfection is seldom, if ever, achievable. The FASB's objective is to maximize those qualities to the extent possible. SFAC 8.3, QC12, BC3.19 Note: This term replaces "reliable" in FASB Concepts Statement (SFAC) 8.3.

Faithful Representation

A ___________ ______________ is cash, evidence of an ownership interest in an entity, or a contract that both (1) imposes on one entity a contractual obligation to either deliver cash or another ________ _____________ to a second entity or to exchange other financial instruments on potentially unfavorable terms with the second entity and (2) conveys to that second entity a contractual right either to receive cash or another _________ ____________ from the first entity or to exchange other financial instruments on potentially favorable terms with the first entity.

Financial Instrument

A __________ ____________ is a contract that imposes on one entity an obligation (1) to deliver cash or another financial instrument to a second entity or (2) to exchange other financial instruments on potentially unfavorable terms with the second entity.

Financial Liability

___________ _____________ is the assets (economic resources), liabilities (obligations), and (owner's) equity of an entity at a point in time. These elements are reported in the statement of financial position (balance sheet). Information about assets, liabilities, and equity is useful to investors and creditors in identifying an entity's financial strengths and weaknesses and in assessing its liquidity and solvency. This information also provides a basis for investors and creditors to evaluate the entity's performance during a period and provides direct indications of the cash flow potentials of some resources and of the cash needed to satisfy obligations.

Financial Position

____________ _______________ is a method of providing information to external users, which is useful in making business and economic decisions. It is a means, not an end in itself. _____________ ______________ is not restricted to financial statements; it includes other means of conveying information that relates to information provided by the accounting system, such as annual reports, prospectuses, SEC (Securities and Exchange Commission) reports, and news releases. It is directed toward the common interest of various potential users. See SFAC 1 for a detailed discussion of the objectives of financial reporting.

Financial Reporting

A ____________ _____________ is a structured representation of historical financial information, including related notes, intended to communicate an entity's economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. _____________ ______________ ordinarily refer to a complete set of _____________ _______________ as determined by the requirements of the applicable financial reporting framework.

Financial Statements

A _____________ is an explanatory note or comment at the end of a financial statement. The following types of notes are typically included by management as support to the basic financial statements: Summary of significant accounting policies Additional support for summary totals found on the financial statements, usually the balance sheet Information about items not reported on the basic statements that may be significant to users in their decision making Supplementary information required by the FASB or the Securities and Exchange Commission (SEC) to fulfill the full-disclosure principle

Footnote

_____________ _____________ __________________ is the process of expressing in the reporting currency of the enterprise amounts that are denominated or measured in a different currency. It is converting financial statements expressed in a foreign currency (i.e., the entity's functional currency) into the reporting currency. This arises from consolidating a foreign operation into the parent (domestic) operation. Because it is not possible to combine, add, or subtract amounts measured in different currencies, it is necessary to translate elements measured in foreign currencies into a single reporting currency. FASB ASC 830-10-20 Translation adjustments do not affect cash flows and are not included in net income, but are reported as a separate component of equity. The economic effects are relatively self-contained and integrated within the foreign operation and relate to the net investment in that operation.

Foreign Currency Translation

_________ ____-___ is the quarterly report required to be filed with the Securities and Exchange Commission (SEC) by all publicly traded companies. The ___________ ____-_______ contains financial statements, a discussion from the management, and a list of "material events" that have occurred with the company.

Form 10-Q

A ___________ ___________ _________________ is an agreement to exchange the different currencies at a specified date in the future at a specified rate (forward exchange rate). It is a foreign currency transaction. (FASB ASC 946-830-20) A gain or loss on a ____________ __________ _______________ is computed as the difference between the foreign currency amount of the contract at the spot rate on the balance sheet (or settlement date) and the spot rate on the transaction date. Any resulting gain or loss should be included in the determination of net income for the period.

Forward Exchange Contract

A _____________ _____________ is an exclusive right granted for a specific period of time (1) by a government for the exclusive use of public facilities or right to furnish specific services (e.g., utility) or (2) by a business for the use of a particular designation and specified services to which the original business (franchiser) has exclusive rights. A franchise right is an intangible asset that is identifiable and separable, may be purchased or developed internally, and has a variable legal life (depending on the contractual agreement). The accounting life is 40 years. ____________ ______________ are recorded at cost to purchase or develop and defend, and are amortized straight-line over the shorter of the contract term, the useful life, or 40 years.

Franchise Rights

"___________ ________ ____________" means there are no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process. In this context, free from error does not mean perfectly accurate in all respects. For example, an estimate of an unobservable price or value cannot be determined to be accurate or inaccurate. However, a representation of that estimate can be faithful if the amount is described clearly and accurately as being an estimate, the nature and limitations of the estimating process are explained, and no errors have been made in selecting and applying an appropriate process for developing the estimate. SFAC 8.3, QC15

Free from Error

____________________ is a term used to indicate at which point title to goods is transferred from seller to buyer: _________ shipping: Ownership passes when the seller delivers the goods to a common carrier. ___________ destination: Ownership passes when the goods are delivered to the buyer or when the buyer receives the goods from a common carrier.

Free on Board (FOB)

___________ _______________ means the financial statements include all the information relevant to the formation of business decisions by users external to the enterprise. This principle rests upon the concept of relevance, the primary quality of accounting information; the user must neither be overloaded with too much information nor misled by exclusion of material details. Full disclosure may be accomplished by presentation in the financial statements, in the notes to the statements, or in supplementary schedules and other forms of presentation. The principle of ___________ _____________ requires the reporting of the economic substance of the transaction, event, or circumstance over the legal form of the transaction; i.e., the substance of the transaction should not be hidden by the mechanics, rules, or technical terminology.

Full Disclosure

__________ ______________ is a term formerly used to designate governmental and not-for-profit accounting. At one time, the accounting for governmental and not-for-profit entities, including schools, health care agencies, and charitable organizations, used multiple funds, i.e., separate self-balancing fiscal and accounting entities. Although private not-for-profits may choose to maintain their underlying financial records on a fund basis, according to FASB ASC 958-210-45-1, the financial statements should focus on the entity as a whole. GASB Statement 34 introduced entity-wide or government-wide reporting to the governmental sector, although state and local governments continue to maintain and report fund-based information as well. Financial reporting for state and local governments consists of both fund-based reporting and entity-wide reporting. The fund-based reporting consists of governmental fund accounting, which uses the current financial resources focus and modified accrual accounting for "governmental" funds, and proprietary ________ _____________, which uses the economic resources measurement focus and accrual accounting for internal service and enterprise funds. Governments also maintain fiduciary fund records on the accrual basis that record information not included in the government-wide financial statements. The term "__________ ____________" no longer refers to the full range of governmental and not-for-profit accounting. Governments continue to use governmental fund accounting and proprietary _____________ _____________ due to the diverse nature of governmental operations and the necessity of assuring compliance with regulations, restrictions, and other limitations that precludes recording and summarizing all governmental financial transactions and balances in a single accounting entity.

Fund Accounting

___________ _______________ is the fund equity or the difference between the asset and liability accounts of a governmental fund. Fund balance should be reported in specific categories as circumstances require: Nonspendable reflects the value of prepaid or inventory items that are not monetary and will not support spending or the value of monetary resources legally contracted to be kept intact. Restricted reflects the value of assets whose use has previously been designated by an external party such as a grant. Committed reflects the value of assets whose use has previously been designated by the highest level of government, typically the legislature or city council. Assigned reflects the value of assets whose use has been previously designated by management without action by the highest level of authority in the government. The amount of resources to be set aside to cover encumbrances at year-end is usually designated either committed or assigned. Unassigned reflects the value of General fund assets whose use has not been previously designated. Only the General Fund has an Unassigned category of ________ ________.

Fund Balance

For governmental funds, the ___________ ____________, termed "fund balance," is the difference between the total fund assets and the total fund liabilities. The ___________ _____________ is, in general, divided into categories reflecting existing restrictions, commitments, and assignments of the fund's resources. The amount not shown as restricted, committed, or assigned is available for appropriation. In funds other than the General fund, the amount shown as assigned is available for appropriation according to the limitations of the specific fund.

Fund Equity

_____________ is to provide (pay) the pension contribution to the trustee. FASB ASC 715-30-20 Per ERISA for employee benefits plans A qualified plan need not have assets sufficient to pay all vested benefits. This point emphasizes the difference between vesting and ________________. Vesting refers to the extent that an employee's accrued benefits are nonforfeitable. However, ______________ refers to the extent that an employer has contributed funds sufficient to satisfy future obligations for accrued benefits. ERISA established minimum _____________ standards that, in effect, imposed time limitations for accumulating sufficient assets to pay accrued retirement benefits. ERISA ______________ requirements Per ERISA minimum ___standards, as a general rule, employers must contribute currently: Normal cost of the plan for the plan year + Annual amortization (including interest) of the actuarial accrued liability generated from periods prior to the inception of the plan+/- Annual amortization of increases/decreases in actuarial accrued liability due to Plan amendments Changes in actuarial assumptions Net actuarial losses/gains + Unfunded current liability charge - Employer contribution for the plan year (Such contributions must be made within 8 1/2 months of the plan's year end and quarterly contributions are required.) Points related to _____________ standard calculation: Interest charges on actuarial accrued liability and actuarial losses are computed on a compound basis. The ERISA maximum amortization periods for actuarial accrued liability, actuarial gains and losses, and the effects of changes in actuarial assumptions are: Actuarial accrued liability generated from periods prior to inception of the plan—30 years; plan amendments—30 years.Net actuarial loss/gain—5 years (15 years for multiemployer plans).Actuarial assumptions—10 years (30 years for multiemployer plans). The ERISA maximum amortization periods differ from the amortization methods and periods required under FASB ASC 715. The balance in the account at the end of a period is carried over to the following year, reducing the required credits for the following year. An actuary computes the ________________ standard account and certifies Schedule B of Form 5500 annually. The actuary includes this information in the actuarial report. Alternative minimum funding: ERISA provides for an alternative minimum ______________ account, which does the following: Effectively requires full funding of accrued benefits Requires basic _____________ standard account to be maintained Allows switch in plan to achieve lower required contribution Is included in Item 10 of Schedule B of IRS Form 5500 Excise tax on ______________ deficiency: If the ______________ standard statement shows a deficiency, an excise tax computed at 10% (5% for multiemployer plans) of the accumulated _________________ deficiency may be imposed on the plan sponsor (employer). An additional tax of 100% of the amount can be imposed if the transaction is not corrected within a specified period. Waiver from _____________ standards: Alternatively, employers not able to meet the ______________ standards without substantial business hardship may apply for a waiver from these standards: Most employers apply for and receive a waiver from the _______________ standards. Request for waiver should be submitted 180 days before the start of the plan year to the commissioner of the IRS. Request for waiver should include the following information: General facts concerning the employer Nature and extent of business hardship Financial condition of the employer Facts concerning the pension plan Other pension, profit sharing, or stock bonus plans Other information It is important to emphasize that FASB ASC 960-10 requires disclosure of compliance with ERISA ___________ standards.

Funding

The basic financial statements of state and local governments consist of government-wide financial statements, ________ financial statements, and notes. The governmental accounting systems should be organized on a __________ basis. A _________ is a fiscal and accounting entity with a self-balancing set of accounts recording the cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations (laws and ordinances), restrictions (e.g., bond covenants), or other limitations (e.g., management decision). A __________ is a control mechanism to ensure that resources provided to governmental entities are used as intended. Types of _________ used in governmental accounting include the following: Governmental ___________ General ___________ Special revenue ____________ Capital project ________________ Debt service _____________ Permanent _____________ Proprietary ____________ Enterprise _____________ Internal service ___________ Fiduciary ______________: Trust ____________ (investment, private-purpose, pension) Custodial ___________ Governmental units should establish and maintain those ____________ required by law and sound financial administration. Only the minimum number of __________ consistent with legal and operating requirements should be established. GASB 1100.102-.103 and 2200

Funds

____________________________________ are net assets without donor restrictions (donors include other types of contributors, including makers of certain grants) designated by an entity's governing board to be invested to provide income for generally a long but not necessarily specified period. A board-designated endowment, which results from an internal designation, is generally not donor-restricted and is classified as net assets without donor restrictions. The governing board has the right to decide at any time to expend such funds. In rare circumstances, ___________________________________ also can include a portion of net assets with donor restrictions. For example, if an NFP (not-for-profit entity) is unable to spend donor-restricted contributions in the near term, the board sometimes considers the long-term investment of these funds. (These are sometimes referred to as quasi-endowment funds or board-designated

Funds Functioning as Endowment

____________ _____________ is the value of an investment and its earnings at some specified future date. The earnings are at a specified rate compounded each period. The ____________ ____________ could also be a payment or a series of payments.

Future Value

The _________ (______________________________________) Codification is an integration of current effective accounting and reporting standards for governments, but does not replace them. Users of the ________ Codification may reference the codification paragraphs in lieu of referencing the underlying authoritative pronouncements.

GASB (Governmental Accounting Standards Board)

_______ are increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from revenues or investments by owners. (SFAC 6.82-.89) _______ are similar to revenues—the distinction depends on the nature of the entity, its operations, and its other activities. The primary purpose of distinguishing between revenues and ________ is presentation and display.

Gains

A ____________ ____________ is an association of two or more persons or entities to carry on as co-owners a business for profit. A ____________ ____________ is formed when two or more persons or entities enter into an agreement to carry on a trade or business with a sharing of the profits and losses between the partners. All partners in a general partnership are referred to as ____________ _____________. All of the general partners are jointly and severally personally liable for the debts and obligations of the partnership, unlike a limited partnership, where not all partners are personally liable.

General Partnership

___________ _________ _________ ___________ (__________) is external financial reporting which is intended to meet the common informational needs of various users who must rely on the information communicated by management. The __________ provides a summary overview of the financial data of all units or subsidiaries or funds and account groups. SFAC 1.28-.31 For business entities, the __________ are: Statement of Financial Position (Balance Sheet), Statement of Income, Statement of Cash Flows, and the related notes to each statement.

General Purpose Financial Statements (GPFS)

___________________________________________ is one of two broad categories into which government organizations are grouped; the other is special purpose units of government. ____________________________________________ include states, cities, and counties and are usually referred to by names (e.g., Colorado, City of Denver, Arapahoe County). Such units of government provide a broad range of services to the public within their jurisdictions.

General Purpose Units of Government

Every governmental entity should prepare a comprehensive annual financial report that includes both fund account reports and entity-wide or government-wide reports that use accrual accounting, the economic resources measurement focus. The government-wide reports encompass all of the activities reported in the governmental and proprietary funds of the primary government, including blended component units. Fiduciary fund information is not included.

Government - Wide Financial Statements

The _____________________________________________________ (________) is the body authorized to promulgate standards of financial accounting and reporting for governmental units. It was created by the Financial Accounting Foundation (FAF) in 1984 as successor to NCGA and is recognized by the AICPA Code of Professional Conduct as an authorized body whose pronouncements must be followed in order to conform to the Compliance with Standards Rule and Accounting Principles Rule (ET 1.310.001 and 1.320.001). The GASB's authority derives from Appendix A of the AICPA Code of Professional Conduct. The _________ is an independent authoritative body created in 1984, under the oversight of FASB and the Governmental Advisory Council of the Financial Accounting Foundation (FAF) and is authorized by the AICPA Code of Professional Conduct as a promulgator of generally accepted accounting principles (GAAP).

Government Accounting Standards Board (GASB)

________________ _________________ is accounting for governmental units. It is an integral branch of accounting that is founded on the same basic concepts and fundamental conventions and shares many characteristics with business accounting. However, since the environment in which governmental units operate is markedly different, the information needs, to be met by the accounting and reporting system, also differ. ____________ ______________ GAAP has evolved from the pronouncements of the National Council on ____________ _____________ and the _____________ _____________ Standards Board and from the use and acceptance by those parties responsible for the accounting and reporting of governmental entities. Users of ___________ ______________ are as follows: Those to whom the government is primarily accountable (taxpayers, voters, service recipients, media, advocate groups, etc.) Those who directly represent the citizens (legislature and oversight bodies) Those who lend or who participate in the lending process (investors and creditors)

Governmental Accounting

____________ _______________ are funds used to account for the financing of general government functions and activities, such as police and fire protection, courts, inspection, and general administration. ____________ ______________ are used to account for the acquisition, use of (changes in), and balance of the government's expendable financial resources and related current liabilities (except those accounted for in proprietary funds). ____________ ______________ are accounted for on the modified accrual basis. GASB 1300.102 The accounting equation is: Current Assets - Current Liabilities = Fund Balance, and Revenues - Expenditures + Other financing sources - Other financing uses = Increase (Decrease) in Fund Balance. Operations are measured in terms of sources and uses of working capital (governmental units are not required to prepare a Statement of Cash Flows). Net income is not measured. ______________ _______________ are: General Fund, Special Revenue Funds, Capital Project Funds, Debt Service Funds, and Permanent Funds.

Governmental Funds

__________ ___________ is all revenues from whatever source derived minus certain exclusions, which are specifically provided by law. It includes both earned income (salary, wages, tips, professional fees, business or farm income, and other compensations received for personal services performed) and unearned income (interest, dividends, rents, royalties, capital gains, unemployment, and some Social Security benefits). Some sources of income are not included in gross income, such as welfare, Veterans Administration (VA) disability, workers' compensation, insurance benefits, damages for injury or illness, child support, gifts, inheritance, life insurance proceeds received because of a person's death, and some scholarships.

Gross Income

_________ ___________ is the sales minus cost of goods sold, the "first stage" profit from the manufacture of goods for sale, and profit before selling and administrative expenses. _________ ________ results from using absorption costing. It is also known as gross profit. __________ _________ analysis involves the evaluation of the _________ __________ variance (the difference between actual and budgeted ________ _________). _________ ___________ variance can be caused by the following: Sales price variance: The difference between planned sales price and the actual sales price Sales mix variance: The difference between the planned sales mix and the mix actually achieved Sales volume variance: The difference between the planned volume of sales and the actual volume achieved Cost price variance: Differences between planned and actual manufacturing costs

Gross Margin

A __________ is a protection against loss, specifically against a foreign exchange loss. It is the act of buying (or selling) a foreign currency for future delivery on the same date that the entity enters into a foreign currency transaction in order to eliminate the risk of ("exposure to") fluctuations in the exchange rate, i.e., the gain or loss that results from the foreign currency transaction—the purchase or sale of goods denominated in a foreign currency—is exactly offset by a loss or gain on the hedging transaction because the exchange rate for both (opposing) transactions are the same on both the date the transactions were entered into and the date they were settled. FASB ASC 815-10 ________ may also be speculative, i.e., a forward contract that does not cover an open receivable or payable—a forward contract designated as an economic hedge of a net investment (the ownership interest) in a foreign entity or purely speculating that the exchange rates will move in an expected direction. Any gain or loss resulting from such hedges is recognized as a separate component of equity (similar to the recognition of translation gain or loss).

Hedge

Per FASB ASC 320-10-35-1, _______ _____ ________ ____________ are debt securities that the enterprise has the positive intent and ability to hold to maturity. ________ _______ _______ _________ are reported at amortized cost. Related dividend and interest income, amortization of any premium or discount from their acquisition, and realized gains and losses from their sale are included in earnings. Sale or transfer of a _______ ______ ______ __________ is not inconsistent with its original classification under certain conditions, defined in FASB ASC 320-10-25-6 as follows: Evidence of a significant deterioration in the issuer's creditworthiness A change in tax law that eliminates or reduces the tax-exempt status of interest on the debt security A major business combination or disposition that necessitates the sale or transfer of _______ _______ _____ ________ to maintain the enterprise's existing interest rate risk position or credit risk policy A change in statutory or regulatory requirements significantly modifying either what constitutes a permissible investment or the maximum level of investments in certain kinds of securities, thereby causing the enterprise to dispose of a ______ _____ _____ ________ A significant increase by the regulator in the industry's capital requirements that causes the enterprise to downsize by selling held-to-maturity securities A significant increase in the risk weights of debt securities used for regulatory risk-based capital purposes

Held to Maturity Securities

______________ is the condition that exists when the amount of a long-lived asset (asset group) carried on an organization's books exceeds its fair value. An _______________ loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment is based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An _________________ loss is measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.

Impairment

Interest must be imputed or charged on debt obligations issued where no interest is provided for or if the rate of interest is less than the interest rate that would be reasonable to charge the debtor under the circumstances; that is, a market interest rate. If the face amount of the note does not represent the present value of the exchange, then interest is imputed. These debt obligations include: noninterest bearing notes or notes with unrealistic low interest rates.

Imputed Interest

___________ _____________ is compensation for meeting or exceeding certain company goals. Some examples include bonuses paid for meeting earnings or customer satisfaction goals, or stock-based compensation that pays more when stock price increases.

Incentive Compensation

The indirect method is one of the two optional methods of presentation of the statement of cash flows (SCF). It presents a reconciliation of net income to net cash provided by operating activities in all major classes of adjustments: accruals of expected future operating cash receipts and payments (receivables and payables), deferrals of past cash receipts and payments (inventory, prepaids, deferred income and expenses), noncash income/expenses (depreciation, amortization, provisions for bad debts), and gains and losses from transactions classified as investing or financing activities (sale of productive assets, sale of debt, liquidating dividend, retirement of debt). (FASB ASC 230-10) The indirect method is allowed by the Financial Accounting Standards Board (FASB) for the statement of cash flows (but the direct method is preferred by the FASB). When the indirect method is used, interest and income taxes paid must be separately disclosed. In governmental accounting, the direct method for stating cash flows is used and not the indirect method. (GASB 2450)

Indirect Method for Statement of Cash Flows

_________ _________ are nonphysical and nonfinancial assets (lacking physical substance) whose value derives from the rights that their ownership confers (e.g., goodwill). The evidence of existence of an intangible asset is elusive, value is often difficult to estimate, and useful life is often indeterminable. It may confer operating, financial, or other income-producing benefits; is recorded at cost (acquisition cost if purchased, cost to develop, maintain, and defend if generated internally); and is amortized in a systematic and rational way (straight-line) over the periods that are estimated to benefit (except goodwill, which is evaluated periodically for impairment). Classification is based on several characteristics: Identifiability: separately identifiable or lacking separate identification (only goodwill is unidentifiable) Manner of acquisition: purchased or developed internally Expected period of benefit: limited by law or contract, related to human or economic factors, or of indefinite or indeterminate duration Separability from entire enterprise: rights transferable without title, salable, or inseparable from the enterprise Assets usually included in this term are the long-lived __________ ___________ usually acquired as operational assets, patents (legal life = 17 years), copyrights (legal life = author's life plus 70 years; accounting life = 40 years), trademarks, franchise rights, and goodwill. Internally generated intangible assets (e.g., patents) are capitalized according to FASB ASC 730-10-05. Development costs are expensed, and only costs associated with registration, maintenance, and legal defense are capitalizable (e.g., legal fees, registration fees, costs of models and drawings, and costs of successful court defenses). For tax purposes, acquired intangible assets that are defined as IRC Section 197 intangibles can be amortized over 15 years.

Intangible Asset

____________ is the charge for the use of money over time. It is the time value of money. ____________ is the amount paid (or received) in excess of the amount borrowed (loaned). Interest is a financing expense (income) and is dependent on the interest rate, the principal amount, and the number of interest periods. ____________ = Principal × Interest rate × Time periods _____________ = Amount to be repaid - Amount received (loaned) Simple ____________: ______________ computed on the same principal amount each time period, regardless of the amount of interest accrued to date. Compound ____________: _____________ is charged on the principal plus all ______________ previously accrued (interest computed on ______________). In macroeconomics, ______________ is a factor payment or factor income. It is a component of gross national product (GNP) (approximately 10%) and is used in the income approach to national income accounting. _____________ includes payments received from banks on savings, from firms on loans, and other miscellaneous income. ______________ is analogous to wages, rent, and profit as a component of factor payments or factor income.

Interest

__________ ___________ requires the payment of interest in addition to the face amount of the note (i.e., more is repaid than was borrowed). Interest is charged over time on the principal (face) amount loaned, adding any unpaid interest to the principal. Compounding happens when interest is charged on the principal plus all interest previously accrued and unpaid (interest computed on interest), which is contrasted with non-interest-bearing.

Interest Bearing

__________ ________ __________ is the value at which an asset is carried on a balance sheet. An example of _________ _______ ___________ would be historical cost less accumulated depreciation.

Net Book Value

_________ ___________ is increase in PBO due to the passage of time. It is the interest on the beginning PBO to bring it up to present value at the end of the accounting period (because the payment of pension benefits is closer at the end of the period than it was at the beginning). It increases PBO. Interest cost will always be present as a component of (increase in) net periodic pension cost. _________ __________ is computed for each accounting period using the actuarial discount rate.

Interest Cost

The ________ _________ is the price, stated as a percentage over time (usually per year), that is charged for the use of money. The ________ _________ is a measure of the time value of money and is dependent upon many factors: the borrower's credit rating (risk of nonpayment), expected changes in purchasing power, the term (length of the time period), collateral, the nature of the lender, and the market for that type of loan (supply and demand).

Interest Rate

___________ __________ are nonreciprocal in nature. Specifically, they are flows of assets (such as cash or goods) without equivalent flows of assets in return and without requirement for repayment. Transfers are legally authorized movements of resources from the fund receiving the resources to the fund through which the resources will be expended. Commonly, transfers are made from the general fund, which receives general tax revenues, to capital projects or debt service funds, which, respectively, account for construction activities or the payment of debt principal and interest. Payments from proprietary funds in lieu of taxes and not in return for services received are considered interfund transfers. An __________ _________ does not represent revenue (expenditure or expense) and should be reported as "Other Financing Sources (Uses)" in governmental funds.

Interfund Transfer

_________ ________ ___________ is financial information prepared and presented in accordance with an applicable financial reporting framework that comprises either a complete or condensed set of financial statements covering a period or periods less than one full year or covering a 12-month period ending on a date other than the entity's fiscal year-end. (FASB ASC 270-10)

Interim Financial Information

The _________ ________ is a time period or date before the cut-off (year-end) date (e.g., a monthly or quarterly period-end).

Interim Period

__________ ___________ are the policies and procedures established by management to provide reasonable assurance that its objectives will be achieved. These policies and procedures are categorized several ways: Accounting controls Administrative controls (management controls) Formal policies and directives such as board of director's resolutions, office manuals, and written instructions Informal policies and procedures such as oral directions from a supervisor Implicit policies and procedures such as unwritten and unspoken operating habits and standards According to COSO (the Committee of Sponsoring Organizations of the Treadway Commission) in the research study Internal Control—Integrated Framework: "________ _________ is a process, effected by an entity's board of directors, management and other personnel, which is designed to provide reasonable assurance regarding the achievement of objectives in one or more categories: "Effectiveness and efficiency of operations "Reliability of financial information "Compliance with applicable laws and regulations "__________ ___________ consists of five interrelated components. These are derived from the way management runs a business, and are integrated into the management process. The components are: "Control Environment "Risk Assessment "Control Activities "Information and Communication "Monitoring Activities"

Internal Control

__________ ________ _________ are proprietary funds used to account for any activity that provides goods or services to another fund, department, or agency of the primary government and its component units or to another government on a cost-reimbursement basis (i.e., an in-house enterprise, such as motor pool, garage, print shop, or data processing center) "Cost-reimbursement" implies that the costs of the service department are expected to be recovered through charges to the other departments (service department revenues = billings to other departments). Internal service funds are accounted for on the accrual basis. GASB 1300.110 ________ ________ _________ use accrual accounting and the economic resources basis of accounting, in contrast to the modified accrual method and current financial resources basis of accounting for governmental funds. Fund equity is termed "net position" and is reported in three categories: net investment in capital assets, restricted, and unrestricted. The capital assets of the service department (e.g., the copier machines) and any related long-term debt are recorded, and depreciated, in the _________ ________ _________.

Internal Service Fund

As stated on the _______ website (www.ifrs.org), the ___________________________________________- is an independent, not-for-profit, private-sector organization working in the public interest. Its principal objectives are: to develop a single set of high-quality, understandable, enforceable, and globally accepted International Financial Reporting Standards (IFRS) through its standard-setting body, to promote the use and rigorous application of those standards, to take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs), and to bring about convergence of national accounting standards and IFRS to high-quality solutions.

International Accounting Standards Board (IASB)

__________ ________ _________ is apportionment of the income tax expense for the current year between the tax payable in the current year and a deferred tax liability that may or may not become payable in future years. It is apportionment among accounting periods and is necessitated by differences in the treatment of certain items under GAAP for financial reporting and under the tax law for income tax purposes. Basic principles of __________ _________ are as follows: A current or deferred tax liability or asset is recognized for the current or deferred tax consequences of all events that have been recognized in the financial statements. The current or deferred tax consequences of an event are measured based on provisions of the enacted tax law to determine the amount of taxes payable or refundable currently or in future years. The tax consequences of earning income or incurring losses or expenses in future years or the future enactment of a change in tax laws or rates are not anticipated for purposes of recognition and measurement of a deferred tax liability or asset. Deferred tax liability/asset is recognized by the liability method (not the deferral method). Basic features of ___________ __________ ___________ are as follows: All temporary differences are related to differences in the timing of accounting recognition compared to tax recognition. All temporary differences originate, and then reverse, with a net effect of zero. Income tax expense is recognized (i.e., matched) in the period in which the tax effect is incurred rather than when it is reported on the tax return. A deferred tax liability (credit balance) represents a future tax liability; a deferred tax asset is a future tax benefit to be realized.

Interperiod Tax Allocation

An _______________ transaction or event occurs between components (segments, divisions, locations, departments) of a single entity and does not involve another entity. For example, a transfer of merchandise between two store locations owned by the same entity is an _____________ transfer.

Intracompany

__________ _________ ___________ is apportionment of the income tax expense for the current accounting period (as determined by application of the liability method to achieve interperiod tax allocation) among the components of the income statement: operating income, income from discontinued operations, accounting changes, prior-period adjustments, and other direct adjustments to capital accounts. ___________ _________ _________ affects only the reporting, not the recording, of income tax expense. The tax effect is reported along with the particular item which gives rise to the effect.

Intraperiod Tax Allocation

The aggregate of items of tangible personal property owned by the business (to which the firm has legal title) intended either for internal consumption in the production of goods for sale or for sale is considered __________. The balance of costs applicable to goods on hand, including raw materials (for use in the production process), intermediate products and parts still in the production process (work-in-process), and finished goods is also considered ____________. The major objective of accounting for inventories is to facilitate the determination of income. This is achieved through the proper valuation of _____________ —the measurement of the value of the current assets and ______________, and the measurement of the related expense and cost of goods sold. The basis of ___________ accounting is cost. Inventories are valued at acquisition or production cost, which is generally held to be the sum of the purchase price plus indirect acquisition costs (freight, insurance, and handling) for purchased goods and the sum of direct materials, direct labor, and allocated factory overhead (i.e., the appropriate general and administrative costs that are clearly related to production) for manufactured goods. Selling, general, and administrative costs not directly related to production should be expensed rather than included in the valuation of inventory, which involves the use of judgment. Standard costs may be used for inventory pricing so long as they are adjusted at reasonable intervals to reflect current conditions. Valuation (pricing) of inventories involves: determination of physical quantity (number of units) and unit cost (in dollars). Unit cost depends on the choice from among various alternative pricing (cost flow) assumptions: last-in, first-out (LIFO), first-in, first-out (FIFO), weighted average, and specific identification. Consideration must also be given to the cost principle (i.e., the lower-of-cost-or-market rule (LCM)). ______________ must be compiled periodically (physical count) and valued and compared to the amounts recorded in the accounts. Accounting records can be maintained under a periodic or perpetual system.

Inventory

_________ ___________ is an activity ratio that measures the liquidity of inventory; it is the measurement of the effectiveness with which a firm manages its inventory. Inventory turnover is the average number of times that inventory "turns over" or was sold during the period, which can indicate possible over- or understocking, inventory obsolescence, or overpricing. The computation is: Cost of goods sold ÷ Average inventory Note: The use of average inventory is: (Beginning balance + Ending balance) ÷ 2 Another average frequently used is the 12-month average, calculated as follows: (Balance month 1 + Balance month 2 + ... + Balance month 12) ÷ 12 This average filters out lows and highs in the business cycle and often provides a better representation of the annual average inventory. _________ _________ can be computed for raw materials, work-in-process, or finished goods inventories.

Inventory Turnover

Property (real or personal) acquired to yield income and/or gain when sold and the expenditure to acquire property are considered ___________. Generally accepted accounting principles (GAAP) classify ___________ as short term and long term depending on their marketability and management's intent.

Investments

________ _________ is operating income plus non-operating revenues minus non-operating expenses minus taxes.

Net Income

VIE: _____ _______ __________ are the ability to remove the entity with the power to direct the activities of a variable interest entity (VIE) that most significantly impact the VIE's economic performance or to dissolve (liquidate) the VIE without cause. Voting interest entity: _______ _______ _______ are the rights underlying the limited partner(s)' ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause.

Kick Out Rights

________ is a cost flow assumption that matches the latest (most recent) costs to current sales revenues. It is based on the assumption that the newest units with the most current acquisition costs are sold first and thus current costs are used to determine cost of goods sold. As a result, the units left in ending inventory are the oldest units. _______ requires identification of inventory layers at different unit costs and can be used with either the periodic or perpetual inventory system, with slightly different results. It matches current costs against current revenue—as costs are rising, reported income will be lower than under FIFO or average cost. It recognizes the flow of costs versus the usual physical flow of units (cash outflow is recognized in the reverse order as cash inflows). The criticism of this method is that it produces an inventory value that is not at current cost. If _________ is used for income tax purposes, it must also be used for reporting purposes. A change from _________ to any other cost flow method is considered a special change in accounting principle that is given retroactive treatment.

LIFO

________ is a factor of production, one of the three essential elements of obtaining or producing wealth. It is human effort—both mental (e.g., entrepreneurial/managerial ability) and physical—and is considered to be held (owned) primarily by households. It is a microeconomic concept. (Compare to land and capital.)

Labor

_______ is a factor of production, one of the three essential elements of obtaining or producing wealth. _______ is all natural/free gifts of nature (minerals, water, land, forests, "raw materials," and the resultant products) and is considered to be held (owned) primarily by households. It is a microeconomic concept. In accounting, __________ is a long-term asset that is used for operations and is not for resale. It is long term in nature, and unlike plant and equipment, it is not subject to depreciation. __________ possesses physical substance and is thus differentiated from intangible property, but unlike inventory, it does not become part of the product that is held for resale. All of the costs necessary to acquire land and prepare it for use are considered part of the historical cost of the _________. This would typically include the purchase price; legal and closing fees; costs such as grading, draining, removal of old buildings, etc. necessary to prepare the land for its intended use; and assumption of past liens, encumbrances, or mortgages. Costs for improvements such as parking lots, fences, and sidewalks that have limited lives should be recorded separately from land as _________ improvements and depreciated over the life of the specific improvement. (Compare to capital.)

Land

A ___________ is a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.

Lease

A _________ __________ is a lessee's obligation to make the lease payments arising from a lease, measured on a discounted basis.

Lease Liability

At the commencement date, the __________ _________ shall consist of the following payments relating to the use of the underlying asset during the lease term: Fixed payments, including in-substance fixed payments, less any lease incentives paid or payable to the lessee Variable _______ _________ that depend on an index or a rate (such as the Consumer Price Index or a market interest rate), initially measured using the index or rate at the commencement date The exercise price of an option to purchase the underlying asset if the lessee is reasonably certain to exercise that option Payments for penalties for terminating the lease if the lease term reflects the lessee exercising an option to terminate the lease Fees paid by the lessee to the owners of a special-purpose entity for structuring the transaction For a lessee only, amounts probable of being owed by the lessee under residual value guarantees

Lease Payments

A _________ ___________ is a lessor's right to receive lease payments arising from a sales-type lease or a direct financing lease plus any amount that a lessor expects to derive from the underlying asset following the end of the lease term to the extent that it is guaranteed by the lessee or any other third party unrelated to the lessor, measured on a discounted basis.

Lease Receivable

The __________ __________ is the noncancelable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor

Lease Term

___________ ____________ are costs incurred to increase the benefit derived from property which is under an operating lease, e.g., additions, finish-out, parking areas, upgrades to facilities, etc.; are intangible, identifiable, inseparable assets (because the property to which the improvements are attached does not belong to the entity); and are amortized, usually straight-line, over the shorter of the useful life of the improvement or the remaining lease term. For tax purposes, under MACRS rules the recovery class of the improvement is the same as that of the underlying property. The recovery period that applies to the class is used, without regard to the remaining term of the lease.

Leasehold Improvements

A __________ is an entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.

Lessee

A _________ is an entity that enters into a contract to provide the right to use an underlying asset for a period of time in exchange for consideration.

Lessor

From the perspective of a lessor, a ____________ __________ is a lease that was classified as a _________ _________ in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date.

Leveraged Lease

A _________ is an imposition of a tax or fee requiring monetary payment that does not result from an exchange transaction. Enabling legislation sometimes places purpose restrictions on the use of the resources. Property (ad valorem) taxes and fines and penalties are examples. The power to levy is one characteristic of a governmental entity.

Levy

________ are probable future sacrifices of economic benefits arising from present obligations of the entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. (SFAC 6.35-.42 and .192-.211) Essential characteristics, all three of which must be present, are as follows: A present duty or responsibility to one or more other entities entails settlement by probable future transfer or use of assets at a specified determinable date, on occurrence of a specified event, or on demand. The duty or responsibility obligates the entity, leaving it little or no discretion to avoid the future sacrifice. The transaction or event obligating the entity has already occurred. Most __________ stem from human inventions—financial instruments, contracts, laws—that are commonly embodied in legal obligations and rights with no existence apart from them. Liabilities permit delay—delay in payment, delay in delivery, etc. ___________ are changed both by the entity's transactions and activities and by events that happen to it. "Valuation accounts," which increase or decrease the carrying value of assets, are part of the related asset and are not liabilities, or assets, in their own right. In governmental accounting: ____________ are defined as present obligations to sacrifice resources that the government has little or no discretion to avoid.

Liabilities

A __________ ____________ is a debt for an amount to which both parties agree. Payment of a lesser amount does not discharge the balance; additional consideration from the debtor (such as payment of the lesser amount before the due date) is required in exchange for the promise by the creditor to forgive the balance. (Contrast to unliquidated debt.)

Liquidated Debt

___________ __________ are distributions to shareholders from other contributed capital accounts rather than retained earnings. A __________ ____________ represents a return of the shareholders' investment, rather than a return on the investment.

Liquidating Dividend

___________ is a form of relief granted under the uniform bankruptcy laws (Chapter 7) that results in the distribution of the debtor's nonexempt, unsecured assets to creditors and a final discharge of the individual debtor from its obligations. _____________ is the ultimate remedy, the remedy that embodies finality, providing the debtor with a "fresh start." All entities, except governmental units, family farms, railroads, insurance companies, and financial institutions, may use Chapter 7. An entity can liquidate voluntarily or involuntarily, and Chapter 7 can be converted to a Chapter 11, 12, or 13 proceeding.

Liquidation

_________ ___________ is the currency of the particular country being referred to (FASB ASC 830-10-20). It may or may not be the same as the functional currency and the reporting currency of the entity.

Local Currency

________ ________ _____________ are those obligations whose liquidation is reasonably notexpected to require the use of existing resources properly classified as current assets, or the creation of another current liability. The maturity exceeds one year. _______ _________ ____________ include long-term notes payable, bonds, and other obligations (e.g., under finance leases). Short-term obligations that are expected to be refinanced (and which meet specific conditions) are also classified as long term.

Long Term Obligations

A __________ ________ __________ is a contract for the construction of a specific project over an extended period of time (more than one accounting period), such as ships, airplanes, bridges, roads, and buildings. Accounting issues include revenue/profit recognition and valuation of construction-in-process. There are two alternative GAAP methods available: completed-contract and percentage-of-completion.

Long-Term Contract

_________ are decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from expenses of regular operations or investments by owners. SFAC 6.82-.89 Losses are similar to expenses—the distinction depends on the nature of the entity, its operations, and its other activities. The primary purpose of distinguishing between expenses and losses is presentation and display.

Losses

_______ ____ _______ ________ (_______) is a cost principle necessitated when the benefit to be derived from the asset has declined below cost (i.e., disposal value of the asset) in the ordinary course of business. It is applied primarily to inventory. It is usually due to damage, obsolescence, spoilage, changes in price levels, or other causes. FASB ASC 330-10-35-1 Note: ________ cannot be used as the method of accounting for investments in marketable equity securities. (FASB ASC 320-10-35) The decline should be recognized as a loss in the current period and the asset is revalued at the lower level (called "market" or market price). Application of the ________ pricing principle follows: "Market" means replacement cost either by purchase or by production. "Market" is limited by a "floor" and a "ceiling." Market should not exceed the net realizable value (i.e., estimated selling price in the ordinary course of business less reasonable costs of completion and disposal) (ceiling). Market should not be less than the net realizable value reduced by an allowance for an approximately normal profit margin (floor). _______ is recorded and reported under either the direct inventory reduction method or the inventory allowance method. _______ may be applied as appropriate to individual inventory items, to a pool (grouping of similar items), or to the total inventory. In the case of excessive stocks of particular items (in excess of projected requirements), ________ should be applied to the excess amount only.

Lower of Cost or Market

Governmental fund and proprietary fund financial statements focus on ______ __________ that should each be shown in a separate column. Nonmajor fund information can be combined into one column for presentation. The General Fund is always a _______ _________. Other ________ __________ meet the following criteria: Total assets, liabilities, revenues, or expenditures(expenses) account for at least 10% of that item for all funds in the same category, governmental or enterprise, added together, and Total assets, liabilities, revenues, or expenditures(expenses) account for 5% of that item for all governmental and enterprise funds added together.

Major Funds

__________ ________ _______ ___________ (_________) is a narrative disclosure of significant aspects of financial performance and conditions required by the Securities and Exchange Commission (SEC) for publicly held corporations. Governments are also required to provide __________ in the financial section of the comprehensive annual financial report (CAFR). The _________ provided by governments should be an objective and readable overview of the government's financial situation as currently known. (GASB 2200.106)

Management Discussion and Analysis (MD&A)

__________ ____ _________ ___________ are supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities.

Management and General Activities

__________ ____________ are buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics: They are independent of each other; that is, they are not related parties, although the price in a related-party transaction may be used as an input to a fair value measurement if the reporting entity has evidence that the transaction was entered into at market terms. They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary. They are able to enter into a transaction for the asset or liability. They are willing to enter into a transaction for the asset or liability; that is, they are motivated but not forced or otherwise compelled to do so.

Market Participants

_________ _________ is the possibility that future changes in market prices may make a financial instrument less valuable or more onerous. If a 10% change in the market index is accompanied by a change of 12% in the price of a particular stock, the market risk of the stock is 12 ÷ 10 = 1.2. Usually, ________ _________ is estimated as the slope coefficient in a simple regression of monthly or weekly returns for the stock on the corresponding returns for the stock market. For fixed-income securities, the ________ ________ represents the risk of change in value of securities due to change in the interest rates. The value of existing fixed-rate securities varies inversely with the interest rates. When rates go up, market values go down, so that (for similar security) yields will be similar.

Market Risk

__________ ____________ are securities that have readily determinable fair values and are considered marketable when a day-to-day market exists and when they can be sold on short notice. The volume of trading in securities should be sufficient to absorb a company's holdings without materially altering the market price. Fair value is considered readily determinable if sale prices or bid-and-asked quotations are currently available from a stock exchange such as the NYSE or the over-the-counter (OTC) market. __________ ____________ are accounted for per FASB ASC 320-10. Example: Financial instruments considered to be marketable securities include preferred or common stock, government or corporate bonds, certificates of deposit, Treasury bills, and commercial paper. Restricted stock is not considered marketable.

Marketable Securities

__________ is the percentage of original cost that is added to cost to determine selling price. It may be expressed in dollar amounts or as a percent of cost. ___________ results in a sales price higher than cost. The percentage of the sales price that exceeds cost represents the margin.

Markup

_________ is the process of associating realized revenues with the expenses and expired costs that were necessary to generate the revenues (i.e., that were incurred in the earning process). ___________ requires the accrual method of accounting. It relates the accomplishment (revenue) with the effort (cost). The _____________ principle provides guidance for the recognition of expenses and may necessitate the use of estimates and allocations (e.g., warranty expense may need to be estimated to match it with the revenue generated from the sale of the product, since the expense may not actually be incurred until the next accounting period). The three pervasive principles of expense recognition are: associating cause and effect (e.g., cost of goods sold and delivery and salary expense), systematic and rational allocation (e.g., rent, insurance, and depreciation), and immediate recognition as incurred (e.g., advertising, research and development).

Matching

___________________________________ are the part of net assets of a not-for-profit entity that is subject to donor-imposed restrictions. (Donors include other types of contributors, including makers of certain grants.)

Net Assets with Donor Restrictions

Information is material if omitting it or misstating it could influence decisions that users make on the basis of the financial information of a specific reporting entity. In other words, ___________ is an entity-specific aspect of relevance based on the nature or magnitude or both of the items to which the information relates in the context of an individual entity's financial report. Consequently, the FASB cannot specify a uniform quantitative threshold for _____________ or predetermine what could be material in a particular situation. SFAC 8.3, QC11 _____________ judgments are concerned with thresholds. Example: You would ask the following questions: Is an item of information, an omission, misstatement, or error large enough, considering its nature and the attendant circumstances, that it is probable that the judgment of a reasonable person relying on the information would have been changed or influenced? Is the item important enough to matter? The relative, rather than absolute, size of the item determines whether or not it is material in a given situation. The auditor's consideration of ____________ is affected by the interaction of quantitative and qualitative factors. The concept of ___________ is pervasive. It is related to the relevance and faithful representation of information and is critical to audit judgments regarding audit risk and disclosure.

Materiality

___________ is the choice of an attribute and unit of measure by which to quantify a recognized item. SFAC 5.65-.72 Items reported in financial statements are measured by different attributes, depending on the nature of the item and the relevance and reliability of the attribute measured. Following are the five _____________ attributes for assets and liabilities currently used: Historical cost (proceeds): the amount of cash, or its equivalent, paid to acquire the asset (received to incur the liability). It is used for property, plant, and equipment, and most inventories. (It is also called "historical exchange rate" or "transaction-based.") Current cost: replacement cost; the amount of cash, or its equivalent, that would have to be paid currently to acquire the same asset. Current cost is used for some inventories. Current market value: the amount of cash, or its equivalent, that could be obtained by selling the asset. It is used for some investments in marketable securities and liabilities involving marketable commodities. Net realizable value: settlement value; the nondiscounted amount of cash, or its equivalent, that is expected to be received (paid) upon conversion (liquidation) of the asset (liability) in due course of business less direct costs. Net realizable value is used for short-term receivables and some inventories, trade payables, and warranty obligations. Present value: the present, or discounted (at the implicit or historical rate), value of future cash flows. It is used for long-term receivables and payables. SFAC 5.67 _____________ scale or unit of _____________ is nominal units of money (i.e., unadjusted for changes in purchasing power).

Measurement

_________ _______________, a term used in governmental accounting, refers to what is being reported on in an entity's financial statements. In governmental funds, the ___________ ____________ is on current financial resources. The financial statements report sources, uses, and balances of current financial resources. The reporting often has a budgetary orientation. Modified accrual accounting is used. For government-wide financial statements, the focus is on measuring all economic resources, whether short term or long term in nature. Accrual accounting is used. Therefore, ___________ ___________ is related to, but not synonymous with, basis of accounting. ___________ ___________ pertains to what is being measured and reported on. In contrast, basis of accounting (e.g., accrual, modified accrual) determines when events and transactions are recorded.

Measurement Focus

__________ ___________ ______________ is a method of grouping expenses according to the kinds of economic benefits received in incurring those expenses. Examples of natural expense classifications include salaries and wages, employee benefits, professional services, supplies, interest expense, rent, utilities, and depreciation.

Natural Expense Classification

The __________ ___________ basis of accounting used for governmental funds is characterized by the imposition of restrictive criteria on the recognition of revenue prior to receipt of cash: governmental revenues and other governmental fund financial resource increments (e.g., bond proceeds) must be (1) measurable and (2) available (i.e., collectible within or soon after the current period so that it is available for the payment of obligations incurred during the same period). (GASB 1600.105) Note: ________ __________ differs from straight accrual accounting in the distinction between "available" and "earned." Modification of straight accrual accounting is required by the differences in environment and measurement objectives. In the governmental environment, inflow and outflows of resources are carefully budgeted and controlled, and governmental funds do not measure net income or earning. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on general long-term debt, which should be recognized when due. (GASB 1100.108)

Modified Accrual

_________ assets and liabilities are those whose amounts are fixed in terms of units of currency, by contract or otherwise. Examples include cash, short- or long-term accounts, notes receivable, payable in cash, money, or a claim to receive or obligation to pay a sum of money, the amount of which is fixed or determinable without reference to future prices of specific goods or services. ____________ assets and liabilities are important in foreign exchange transactions (FASB ASC 830-10-45-17) and general price-level changes (FASB ASC 255-10-55-1).

Monetary

The _________ ______ _________ is the assumption that the monetary unit (dollars in the United States) is the most appropriate common denominator for measuring, reporting, and analyzing economic activity.

Monetary Unit Assumption

"____ _____ _____ ______" is a level of likelihood that is more than 50%.

More Likely Than Not

FASB ASC 820-10-20 defines the ________ ________ __________ as "the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transportation costs."

Most Advantageous Market

________ _________ is an average cost flow assumption used with the perpetual inventory system in which a new average unit cost is computed after each purchase and is applied to each issue (sale) of units. It is essentially a short-term, repeated weighted-average method that provides a weighted average on a continuous basis. It allows for the current and continuous costing of the units on hand.

Moving Average

The _______ _______ _________ is an average cost method of inventory valuation that is used with perpetual inventory records. With this method, a new average unit cost is computed each time a purchase is made. This new unit cost is then used for all withdrawn inventory until the next purchase is made. This procedure is repeated with each new purchase.

Moving Average Method

A _________ depiction is without bias in the selection or presentation of financial information. A ___________ depiction is not slanted, weighted, emphasized, deemphasized, or otherwise manipulated to increase the probability that financial information will be received favorably or unfavorably by users. ____________ information does not mean information with no purpose or no influence on behavior. On the contrary, relevant financial information is, by definition, capable of making a difference in users' decisions.

Neutral

___________ is an ingredient of faithful representation. A neutral depiction is without bias in the selection or presentation of financial information. A neutral depiction is not slanted, weighted, emphasized, deemphasized, or otherwise manipulated to increase the probability that financial information will be received favorably or unfavorably by users. Neutral information does not mean information with no purpose or no influence on behavior. On the contrary, relevant financial information is, by definition, capable of making a difference in users' decisions. (SFAC 8.3, QC14) "Bias" is defined as the tendency of a measure to fall more to one side than the other of what it represents instead of being equally likely to fall on either side. Bias means a tendency to be consistently too high or too low.

Neutrality

A ______ ______ _________ note includes the interest in the face amount of the note, i.e., the face value equals the principal plus interest as a single amount to be paid back at maturity. It is a discounted (present value) note, i.e., interest is charged in advance and deducted from the amount of the loan. The borrower receives some amount (the principal) less than the face amount (principal plus interest) that will be repaid at maturity. (Contrast to interest-bearing.)

Non-Interest-Bearing

A _______________ stock option or plan is a right made available to all employees (not as part of compensation) to purchase shares of common stock in accordance with an agreement, upon payment of a specified amount (usually by monthly payroll deduction). It involves the issuance of stock at no cost to the corporation (debit cash, credit capital stock, and CCEP). A ________________ stock option/plan must meet four criteria: Substantially all full-time employees meeting limited employment qualifications may participate. Stock is offered to eligible employees equally or based on a uniform percentage of salary or wage. The time permitted for exercise of an option or purchase right is limited to a reasonable period. The discount from market price of the stock is no greater than would be reasonable in an offer of stock to others (usually up to 15%). A ________________ stock option does not involve special accounting issues. Accounting is the same as for other issuances of stock. (Contrast to compensatory.)

Noncompensatory

______________ refers to all assets and liabilities other than monetary ones; assets and liabilities whose amounts are not fixed in terms of units of currency by contract or otherwise. Examples include inventories; investments in common stocks; and property, plant, and equipment. _______________ assets received in a nonmonetary transaction should be recorded at the fair value of the assets surrendered to obtain it. The transfer of a _______________ asset in a nonreciprocal transaction should be recorded at the fair value of the assets transferred. In both cases, any gain or loss realized should be recognized. _______________ assets and liabilities are important in foreign exchange transactions

Nonmonetary

A _____________ ______________ is a reciprocal transfer between the enterprise and another entity that involves little or no cash, monetary assets, or liabilities. The accounting is based on fair value—the new asset acquired is valued at its fair value or the fair value of the asset surrendered, whichever is more clearly evident. Any difference between the fair value of the asset received and the asset surrendered should be recognized as a gain or loss. (FASB ASC-845-10-30-3) Exceptions to fair value accounting: Fair value is not determinable: Record the asset at the book value of the asset surrendered. ___________ __________ of operative asset in which the exchange does not have commercial substance: Record the asset at the book value of the asset surrendered. If some cash is involved, some gain may be recognized.

Nonmonetary Exchange

Formerly termed "operating transfer," a __________ __________ ___________ refers to an interfund transfer of a routine or recurring nature that does not represent a loan. It is a shift among funds of financial resources not intended to be repaid. They are reported as an "Other financing use" by the donor fund and an "Other financing source" by the recipient fund.

Nonreciprocal Interfund Transfer

A __________ ___________ is a transaction in which an entity transfers an asset to another entity (or receives an asset or cancellation of a liability) or incurs a liability without directly giving or receiving value in exchange. Examples include investments by owners, distributions to owners, reacquisition of stock, imposition of taxes, gifts, charitable or educational contributions given or received, and thefts. (SFAC 6.137) Note: In governmental accounting, some interfund transfers are considered nonreciprocal interfund activity when there is reimbursement of one fund by another or when resources are shifted to one fund without an equivalent flow in return. (GASB 1800.102)

Nonreciprocal Transfer

Certain resources of governmental funds are not monetary in nature and will not lead to a collection of monetary resources in the future. These assets, usually prepaid items and inventories, are considered _____________. At year-end, a category of Fund balance is set aside equaling the total of such assets.

Nonspendable

According to the FASB ASC Glossary, a _______ _______ _________ entity is distinguished from a business entity by three characteristics: contribution of significant resources from providers who do not expect proportionate return, operating purposes other than to provide goods or services for profit, and absence of ownership interests like business enterprises. In addition, the IRS stipulates that no part of the organization's net earnings can inure for the benefit of any specific person or persons.

Not For Profit

A ______ is a type of commercial paper. It is a written promise to pay (other than a CD) by a party (maker) a sum certain of money to the order of another (payee). A ______ is the simplest type of commercial paper. U.C.C. 3-104 Characteristics of ________ include the following: Two parties—maker and payee. Is a promise by the maker to pay. The party who drafts the _______ is the maker. The maker is primarily liable. The indorser(s) are secondarily liable.

Note

A _________ ____________ is a contractual right to receive a sum certain of money on fixed or determinable dates at a fixed rate of interest. It is a formal and unconditional written agreement. A ________ __________ may be interest-bearing or noninterest-bearing; however, even "noninterest-bearing" notes have an interest element included in the face amount of the note. _______ _________ are of longer term (e.g., 3-24 months) than accounts receivable and accrue interest over time at a stated rate. ________ _________ should be recorded at present value. ________ ____________ are usually negotiable, may be sold or transferred, usually at a discount (i.e., the seller receives an amount less than the face value, the buyer or payee collects the higher face value at maturity, and the seller recognizes a loss on the sale). _________ _________ may be sold with or without recourse. Accounting for _________ ___________ involves recognition at the origination date (recording the liability), valuation and accrual of interest during the time to maturity, and disposal at or before maturity.

Note Receivable

Notes are pieces of information disclosed in notes added to the end of financial statements, or parenthetically on the face of the financial statements, which amplify or explain, and are essential to the understanding of information recognized in the financial statements. Notes are considered integral parts of the financial statements prepared in accordance with GAAP. (SFAC 5.7) Information presented in notes includes the following: Significant accounting principles used Alternative measures for assets and liabilities Information about long-term obligations (when due, the interest rate, restrictive covenants) Inventory measurement method used (LIFO, FIFO, etc.) Revenue recognition policies Discussion of contingencies, claims, and assessments

Note to Financials Statements

A ________ _________ is a contractual right to pay a certain sum of money on fixed or determinable dates at a fixed rate of interest. It is a formal and unconditional written agreement. _________ __________ may be interest-bearing or noninterest-bearing; however, even "noninterest-bearing" notes have an interest element included in the face amount of the note.

Notes Payable

In the context of external auditing, ___________ is remaining impartial in judgments in order to get more quality information. To be objective is to be intellectually honest and free of conflicts of interest. ____________ is the ability to maintain an impartial attitude in both fact and appearance based on one's actions and relationships. The quality of _____________ is required of all CPAs, not just those in public practice. It is a state of mind that is essential to the maintenance of the public's trust: "A member should maintain ____________ and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services." (ET 0.300.050.01) "In the performance of any professional service, a member shall maintain ______________ and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others." (ET 1.100.001.01)

Objectivity

An __________ is a debt or a liability of an entity or an amount owed. In governmental accounting, it is an encumbrance or commitment of the governmental unit.

Obligation

_______________________ means a company does not include a liability on its balance sheet. The goal of ___________________________ is to reduce or maintain a company's debt at or below a prescribed level so that its debt-to-equity ratio is low. When a company has a favorable ratio, that company appears to be a good credit risk.

Off Balance Sheet Financing

A _____________ is an individual or company that owns at least one share of stock in a company. Each ___________ possesses the rights given to the holders of the particular stock issue.

Shareholder

The term "__________ __________" is no longer considered proper terminology in the governmental budgeting, accounting, and reporting process, although it is frequently used colloquially by governmental personnel. It formerly referred to interfund transfers of a routine or recurring nature. Such transactions are correctly termed "nonreciprocal interfund transfers" and do not represent revenue (expenditure or expense). They should be reported as "Other Financing Sources (Uses)." An interfund transfer does not represent a loan. It represents a shift among funds of financial resources that are not intended to be repaid.

Operating Transfer

An ________ ________ is a specified price at which a stock option may be exercised. It is the specific price which must be paid to acquire shares of stock under a stock option and is specified in the stock option agreement.

Option Price

An ________ ___________ assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities. It is not a forced transaction (for example, a forced liquidation or distress sale).

Orderly Transaction

An _________ __________ is an annuity that is payable at the end of each period. An annuity due is payable at the beginning of each period. It is important to distinguish between the two when calculating present (or future) values.

Ordinary Annuity

__________ ___________ include any cost incurred in the formation of a business entity. These costs include legal fees, accounting fees, registration fees, and the costs associated with the issuance of shares of a corporation, such as promotion costs, prospectus costs, and SEC (Securities and Exchange Commission) registration fees. Expenditures by a corporation related to issuing or selling shares of stock or other securities are capitalized and are not deductible __________ ____________. Taxpayers may deduct up to a specified amount in the taxable year in which the business begins. The amount is reduced by the amount by which the cumulative cost of organizational expenditures exceeds a certain amount; any remaining organizational expenditures not deducted are amortized over a 15-year period (180 months) beginning with the month operations begin.

Organizational Costs

_________ _____________ __________ are benefits other than pensions such as prescription drug coverage or healthcare insurance provided certain employees at or after separation from employment. The FASB terms similar benefits that are not retirement income as "postretirement benefits."

Other Postemployment Benefits

Also termed shareholders' or stockholders' equity, _________ _________ is the remaining interest in assets after all liabilities are honored to be spread among the shareholders of common or preferred stock.

Owners' Equity

______ _________ is the per-share value of capital stock fixed by the articles of incorporation or legal capital. ________ _________ is the amount of capital that must be retained in the corporation. It is the value at which each share of stock is recorded in the capital stock section of stockholders' equity. _______ ________ is changed by a stock split.

Par Value

____________ are limits on assets of not-for-profit entities imposed by donors' explicit, or clearly evident implicit, stipulations. Decisions, resolutions, appropriations, etc. by directors, trustees, or managers do not result in restrictions on assets.

Restrictions

The _____ ________ _________ is a method for accounting for the purchase and resale of treasury stock that uses the two-transaction view: as (1) the purchase and retirement and (2) the subsequent reissuance of the shares. The par value method uses a contra-capital stock account: for purchases, it reduces capital stock, contributed capital, and/or retained earnings; for resale, it increases capital stock and contributed capital. The ______ _______ _________ has the same effect on totalstockholders' equity as the cost method but apportions the amount to the component equity accounts.

Par Value Method

A ___________ is an association of two or more persons to carry on as co-owners of a business for profit. ___________ are governed in the various states of the United States by the Uniform ____________ Act (UPA). A ____________ may be general, limited, or joint venture. Characteristics of a ____________ include the following: Voluntary association of persons as individuals (the ______________ has no separate legal identity under common law, but under the UPA it is now an entity for most purposes) Simple agreement without governmental sanction A fiduciary relationship (mutual agency—each partner is an agent for the others and for the _____________) Co-ownership Mutual agency of partners Joint and several liability A ______________ does not pay income tax. It is a pass-through entity, so profits and losses of the ____________ pass through to its partners. A ___________ does file an informational tax return using IRS Form 1065, U.S. Return of ___________ Income.

Partnership

A ________ is any requirement that is imposed or can be imposed on the lessee by the lease agreement or by factors outside the lease agreement to do any of the following: Disburse cash Incur or assume a liability Perform services Surrender or transfer an asset or rights to an asset or otherwise forego an economic benefit, or suffer an economic detriment. Factors to consider in determining whether an economic detriment may be incurred include, but are not limited to, all of the following: The uniqueness of purpose or location of the underlying asset The availability of a comparable replacement asset The relative importance or significance of the underlying asset to the continuation of the lessee's line of business or service to its customers The existence of leasehold improvements or other assets whose value would be impaired by the lessee vacating or discontinuing use of the underlying assetAdverse tax consequencesThe ability or willingness of the lessee to bear the cost associated with relocation or replacement of the underlying asset at market rental rates or to tolerate other parties using the underlying asset

Penalty (Leases)

________ _______ ___________ are liabilities derived from the actuarial present value of promised future pension benefits payable to employees for services rendered, calculated in aggregate. Three different obligations may exist, related as follows: * Vested benefit obligation (VBO) $ XXPlus: Nonvested benefit obligation X * Accumulated benefit obligation (ABO) XXPlus: Effect of estimated future compensation levels X * Projected benefit obligation (PBO) $XXX==== PBO is affected by changes in the six components of the net periodic pension expense and decreased by the amount of benefits paid to retirees during the period. FASB ASC 715-30-35-2 FASB ASC 960-20-25-2

Pension Benefit Obligations

________ ________ __________ are assets, usually investments (stocks, bonds), which have been segregated and restricted (usually in a trust) to provide pension benefits. _________ _________ ___________ are provided annually by the plan trustee. _________ _______ __________ are used to determine under- or over-funding of the pension obligations at each measurement date. Plan assets include Amounts contributed by employer + Amounts earned from the assets - Benefits paid to retirees - Any nonbenefit obligations of the plan. Assets are valued on the measurement date at fair market value. Note: Operational assets of the plan (land, building, equipment, fixtures) are valued at book value and are not included in the plan assets because they are not available to pay benefits.

Pension Plan Assets

A _________ is an agreement whereby the employer undertakes to provide to retired employees benefits that can be estimated or determined in advance, based on the provisions of the plan and established company practice. A _________ is a form of deferred compensation in which the employee receives a portion of earned compensation after retirement. A ___________ involves three parties: the employer, the employee, and the trustee. ____________ are accounted for under accrual accounting. A __________ plan may be: a defined contribution plan or a defined benefit plan. In applying accrual accounting to ___________ plans, FASB ASC 715-10 allows the use of three unusual accounting techniques: delayed recognition of certain events, reporting net cost, and offsetting liabilities. Accounting for defined benefit pension plans requires four basic elements: ___________ benefit obligations of the employer __________ plan assets Net periodic __________ expense Unfunded accrued or prepaid __________ cost Disclosure of __________ plans includes the following: Statement of income—net periodic __________ expense Statement of financial position: Assets:Prepaid __________ cost Noncurrent asset if overfundedLiabilities:Accrued __________ cost Current or noncurrent liability if underfundedOwners' equity:Unrealized capitalUnrealized pension cost (debit, related to additional minimum liability)

Pension Plans

In general, the FASB ASC Glossary defines a pension fund as the assets of a pension plan held by a fund agency. Governments may use a ________ _______ __________ to manage pension or other retirement and postretirement benefit plans. _________ _______ __________, like other fiduciary funds, are accounted for on the accrual basis: all contributions to and earnings of the fund are ________ ________ _______ (PTF) additions, and all benefit payments, return of contributions, and pension plan administration costs are PTF deductions. Depreciation is recorded and a change in net position (Additions - Deductions) is reported.

Pension Trust Fund

A __________ ____________ is a promise in a contract with a customer to transfer to the customer either: a good or service (or a bundle of goods or services) that is distinct, or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

Performance Obligation

The ________ _____ ________ is the total period of time that an asset is used to fulfill a contract with a customer (including the sum of any nonconsecutive periods of time).

Period of Use

The ________ _______ _________ is a method of measuring the physical quantities in inventory under which the units (and costs) are determined at the end of the accounting period based on a physical count. Items are: counted, weighed, or otherwise measured and multiplied by the unit cost (depending on the cost flow assumption utilized) to value the inventory. Cost of goods sold is the residual amount and cannot be independently verified. Cost of goods sold = Beginning inventory + Purchases - Ending inventory The units in inventory at any point in time during the accounting period are notexactly known—the beginning balance does not change until the end of the period. Contrast to perpetual inventory. (The periodic inventory system is analogous to a "batch" processing system.)

Periodic Inventory System

The _________ ________ is the ability to divide the "life" of a business into shorter, artificial time periods for financial reporting purposes.

Periodicity Assumption

___________ ____________ are differences between accounting income and taxable income that are not expected to reverse. These are amounts that arise as a result of transactions or events recognized in the financial statements that do not have any tax consequences or vice versa (items that have a tax consequence but are not determinants of accounting income or have no effect on interperiod tax allocation). Tax payable in the current period equals the income tax expense that arises from the item. Items that result in __________ __________ include the following: Tax-free interest (on municipal bonds), insurance expense for premiums paid on officers' life insurance, amortization of goodwill, and compensation expense on ESOPs (i.e., income or expenses that are determinates of accounting income but have no tax effect—not reported on the tax return) Income exclusion for corporate dividends received and the excess statutory depletion over cost depletion (i.e., items that are not recognized in accounting income but do have tax consequences)

Permanent Differences

In governmental accounting, a __________ __________ is a governmental fund to be used to account for resources legally restricted such that only the earnings, not the principal, may be used to support the reporting government's own programs. The government itself is the beneficiary of the earnings. A private-purpose trust fund, a fiduciary fund, should be used if the benefits accrue instead to individuals, private organizations, or other governments.

Permanent Fund

The _________ _________ system is a method of measuring the physical quantities in inventory under which the units received (manufactured) and issued (sold) are recorded continuously during the accounting period. Costs may also be determined continuously or determined only at the period-end. The current, up-to-the-minute quantity on hand is known at all times. (Contrast to periodic inventory system.) _________ _________ is analogous to an online, real-time processing system. Physical count is not necessary except as a check on the accounting system. (This check is usually achieved by cycle counts, which are periodic counts of selected items.) Any difference found is charged to an inventory overage/shortage account. The _________ ___________ system is the preferred method of measuring the physical quantities and has become more feasible to apply in more industries as data processing costs have declined. It provides for critical control and safekeeping of inventory and for accurate inventory management.

Perpetual Inventory

__________ _________ ____________ are financial statements prepared for an individual, a husband and wife, or a family. An authoritative source is FASB ASC 274-10. __________ __________ _________ include a statement of financial condition and an optional statement of changes in net worth.

Personal Financial Statements

_________ ___________ is the physical count of inventory taken by the client at year-end (i.e., on the last day of the fiscal year) to obtain evidence regarding existence and completeness. The auditor observes this procedure and makes selected test counts. The observation of inventories is one of the required audit procedures. (AU-C 501.11(a)) Based on the auditor's evaluation of internal controls over inventory, the physical count may be taken prior to year-end. If the auditor does not observe the client's physical count, he must either apply other audit procedures to assure himself of the inventory quantities or disclaim an opinion. (AU-C 501.13)

Physical Inventory

_________ _______ __________ is a method of accounting for business combinations in which the parent acquires substantially all (90% or more) of the voting stock of another entity by exchanging shares of its own stock for the shares of the subsidiary; the parent does not disburse resources. _________ ______ __________ is also a uniting of the ownership interests by an exchange of equity securities such that ownership interests continue, and it maintains continuing ownership of the combined entity by the same owners of the entities that were combined. The assets and liabilities of the constituent entities are combined at the recorded amounts (book value); no goodwill is recorded and it must meet all 12 specified (and specific) criteria. Prior to SFAS 141, Business Combinations, purchase and pooling of interests methods were both acceptable under GAAP but were not alternative methods of accounting for the same business combination—the combination that did not qualify as a pooling of interests had to be accounted for as a purchase. For business combinations after the effective date of SFAS 141, only the purchase method may be used. Note: ________ ______ __________ has been grandfathered into the FASB Accounting Standards Codification for some entities. (FASB ASC 105-10-70-2)

Pooling of Interests

An employer's ___________ ________ _________ __________ (______) are its health care obligations under an employee pension plan.

Postretirement Health Care Benefits (PHCB)

Financial information has ___________ _________ if it can be used as an input to processes employed by users to predict future outcomes. Financial information need not be a prediction or forecast to have _________ ___________. Financial information with _________ ___________ is employed by users in making their own predictions. (SFAC 8.3, QC8)

Predictive Value

_________ ________ is ownership interest (class of stock) that carries preferences or specified priorities when compared to common stock; it is usually nonvoting and senior to common stock in dividend and liquidation preference and participation rights (to specified limits). It has characteristics of both debt and equity and may have other features, such as convertibility to other securities, call features, and redemption. __________ _________ is a "security." While preferred stockholders generally must be paid before common stockholders, preferred stockholders are paid after creditors. Dividend preference is usually expressed as a percentage of the par value of the __________ __________ but may also be expressed as a specific dollar amount per share. Preference may be cumulative or noncumulative, as well as participating, nonparticipating, or partially participating (where it is participating along with common stock in the receipt of dividends in excess of the stated preferred dividend).

Preferred Stock

___________ is the excess of proceeds (cash paid) on a bond over the face value of the bond. A bonus (i.e., the borrower receives proceeds more than the face value) is considered a premium, which is in contrast to a discount. A ___________ results when the stated interest rate is greater than the effective (market) rate. A ____________ is amortized over the life of the bond with the amount of amortization reported as interest, and it is also the difference between the present value of the bond and its face value (where the face value is lower). A ___________ is recorded on the balance sheet as an adjunct account inseparable from the bond that gives rise to it. It must be disclosed on the balance sheet as a direct addition to the face amount of the bond. Example: A bond at face value is a $1,000, 20-year bond bearing interest at 10% annually where the stated interest rate is 10% and cash interest paid is $100 per year. If the prevailing market rate is 8%, the bond will sell for more than $1,000 (proceeds received will equal $1,197) because the lender could only earn 8% on any other investment (so this bond's market value is more than its face value). The bond sells at a premium. i = .08, n = 20, (PVA × 100) = (9.82 × 100) + (PV × 1,000) = (.215 × 1,000) Selling price = 982 + 215 = 1,197 Premium = 1,197 - 1,000 = 197

Premium

A _________ ________ is a cost paid in advance that entitles the entity to receive service in the current and future accounting periods. It is a current asset. Examples include insurance or rent paid in advance. A __________ _________ is usually amortized over interim (e.g., monthly) accounting periods.

Prepaid Asset

The ___________ _________ ________ is the asset that results from the overfunding of the pension fund, i.e., the excess of cash payments into the pension fund over the recognized pension expense. _______ __________ _________ are the cumulative employer contributions in excess of accrued net pension cost. (FASB ASC 715-30-25-1)

Prepaid Pension Cost

The unmodified audit opinion uses the phrase "________ _________ in accordance with accounting principles generally accepted in the United States of America or an applicable financial reporting framework." The fairness of presentation can only be evaluated in light of an applicable financial reporting framework, and provides the framework (the uniform standard for judging the presentation of the financial statements). If the financial statements "__________ ________ in accordance with accounting principles generally accepted in the United States of America": the accounting principles selected and applied have general acceptance. the accounting principles are appropriate. the financial statements (including notes) are informative of matters that might affect their use, understanding, and interpretation. the information presented is classified and summarized in a reasonable manner, neither too detailed nor too condensed. the financial statements reflect the underlying events and transactions.

Present Fairly

___________ ___________ is one of the attributes used to measure assets and liabilities. _________ __________ is the present, or discounted (at the implicit or historical rate), value of future cash flows used for long-term receivables and payables.

Present Value

In governmental accounting, the reporting entity is considered the __________ ___________. The key characteristic of a _________ _________ is that it is a governing body separately elected by the citizenry. Additionally, it is legally separate and fiscally independent of other governments.

Primary Government

____________ is the amount of cash, or cash equivalent, borrowed (loaned) and the amount subject to interest that equals the face value in an interest-bearing note. ____________ is used to compute interest: Interest = ____________ × Interest rate × Time A person who authorizes another person to represent them in a business transaction is also called a principal. The equity account that has the credit offsetting the recording of the initial inventory of an estate or trust is also called ____________.

Principal

A ________ _______ is an accounting period that ended before the current period. This need not be the period immediately preceding the current period. Financial information from ________ __________ is used in the current period for analytical procedures, a basis for accounting estimates (e.g., uncollectible accounts, warranty costs, coupon redemption rates), and for the presentation of comparative financial statements.

Prior Periods

The _________ ________ ________ is the cost of retroactive benefits granted in a plan amendment (the initiation of a new plan or a change in the terms of an existing plan: an increase in benefits, including those attributed to service rendered in prior periods). It represents an increase in PBO at the date of the amendment. (FASB ASC 715-30-20) The ________ _________ ________ represents a delayed recognition component of net periodic pension cost. The entire cost of retroactive benefits is not required to be recognized; rather, it is amortized by assigning an equal amount to each future period of service of each employee active at the date of the amendment who is expected to receive benefits under the plan or amortized straight-line over the average remaining service period of the employees expected to receive benefits.

Prior Service Cost

______ _________ is a financial statement or report prepared using assumptions regarding future events. It may also represent the drafting of forms or statements without values for possible presentation or future use.

Pro Forma

The FASB ASC Glossary defines __________ as "cash, derivative instruments, or other assets that are obtained in a transfer of financial assets, less any liabilities incurred." _________ may be from voluntary or involuntary conversion of the property.

Proceeds

___________ ____________ is costs associated with the manufacturing process that are capitalized in inventory; generally, they are the costs that add value to the units produced. Costs are accounted for as if they are "absorbed" by the units and stay with them through work-in-process and finished goods inventory (as the value of the units in inventory) and into cost of goods sold when the unit is sold. Product cost includes Direct labor + Direct materials + Manufacturing overhead.

Product Cost

Accounting _________ is the difference between revenue and costs in a business enterprise related to the product or service provided by the organization. Economic ________ is the increase in wealth for the investor related to an investment.

Profit

The _______ ________ __________ is a profitability ratio which measures the profit generated from each dollar of sales. It is a measure of management's success in controlling the expenses involved in the generation of sales. ________ ________ __________ can be computed for gross profit, operating profit, or net income. The computation is profit measure ÷ net sales. Note: The profit measure used can be gross, operating (EBIT), or net income. Limitations on use of this ratio include accrual income includes estimations, and income includes some costs over which management has little or no control.

Profit Margin on Sales

The __________ _________ or percentage is the percentage interest that a partner will share in the profits of the partnership for the year. This percentage can vary as the partnership agreement is amended. The mere right to share in earnings and profits of a partnership is not the same as a capital interest in a partnership. A capital interest in a partnership can be contrasted to a "__________ __________" where the owner of such an interest only shares in the profits and losses of the company and the partner with the _________ _________ has no claim against the assets of the partnership in the event of a liquidation.

Profits Interest

In governmental accounting, programs are financed with program revenues and general revenues. ________ ___________ derive directly from the program itself or from parties outside the reporting government's taxpayers or citizenry, as a whole; they reduce the net cost of the function to be financed from the government's general revenues. Financing from outside parties that is restricted to a specific program or programs is considered program revenue. (GASB 2200.136) Note: A not-for-profit entity such as a university may choose to report information about its major programs showing the interrelationships of program expenses and ________ __________. Generally, such reporting is considered supplemental. (FASB ASC 958-720-45-4)

Program Revenues

A ___________ __________ ___________ is the actuarial present value as of a specific date of all benefits attributed by the pension benefit formula to employee service rendered as of that date. It is measured using assumptions as to future compensation levels. FASB ASC 715-30-20 ____________ ___________ ____________ is provided annually by the actuary and is used to determine under- and over-funding of pension obligations. Computation (provided by actuary): PBO, beginning balance (includes transition cost) + Service cost + Interest cost + Prior service cost ± Actuarial losses (gains) - Pension benefits paid to retirees = PBO, ending balance. Unfunded PBO is the excess of PBO over plan assets.

Projected Benefit Obligation

In not-for-profit accounting: A _________ _____ _________ represents an unconditional agreement by a donor to transfer assets to the not-for-profit entity. The promise represents a social, moral, and often legal obligation. Use of this term, rather than the colloquial term "pledge," is encouraged by the FASB. Promises are accounted for in the Contributions Receivable account. Formerly, an account called Pledges Receivable was used.

Promise to Give

_________ _____ is an imposed nonexchange revenue levied against real or personal property by a governmental entity. Enabling legislation sometimes places restrictions on the use of ___________ ______ revenues and/or may specify when the resources are to be used. In the context of state and local governments, ___________ ______ are taxes levied by a legislative body against agricultural, commercial, residential, or personal property pursuant to law and in proportion to the assessed value of the property, or another appropriate basis. Ad valorem (based on value) property taxes are a major source of revenue for many local governments.

Property Tax

____________ _____ are funds used to account for the ongoing activities of a governmental unit which are financed and operated in a manner similar to commercial (business) activities (e.g., utilities, swimming pools, print shops, motor pool) where the intent of the governing body is that the costs (expenses, including depreciation) of providing the goods or service on a continuing basis shall be financed or recovered primarily through user charges (either external or internal users). ___________ ________ are accounted for on the accrual basis in the same way as a business enterprise. ___________ _______ include accounts for all related assets and liabilities (not just the expendable current assets and related current liabilities as in the governmental funds) and net position (or fund equity) reported in three categories: net investment in capital assets, restricted, and unrestricted. The capital assets and long-term debt of the proprietary fund are recorded in the accounting records of the fund. GASB 1300.102 The accounting equation is: Assets + Deferred outflows of resources - Liabilities - Deferred inflows of resources = Net position Operations are measured in terms of revenues earned and expenses incurred, and are reported in three categories: Operating, Nonoperating, and Other (e.g., capital contributions, special items, and transfers). _________ ________ are: Enterprise funds and Internal service funds. Financial statements required for proprietary funds are the same as for businesses: Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows.

Proprietary Fund

In __________ _________ of an accounting change: the cumulative effect is included in the current and future reporting periods by revising current and future allocations (no cumulative effect is computed or allocated to prior periods), prior-period financial statements are carried forward and presented without change, and no pro forma data is required. "___________" means forward in time. It is used with changes in accounting estimates. Note disclosure of the change, with explanation and justification, and of the impact on income and EPS is also required.

Prospective Recognition

A __________ ___________ is a contract to service financial assets under which the estimated future revenues from contractually specified servicing fees, late charges, and other ancillary revenues are expected to more than adequately compensate the servicer for performing the services. A servicing contract is either (a) undertaken in conjunction with selling or securitizing the financial assets being serviced or (b) purchased or assumed separately.

Servicing Asset

In data processing, a __________ is a working model of a system developed through successively more refined versions until a satisfactory system is obtained. ___________ can be very expensive and time-consuming because of the number of iterations required in putting a working model together. However, it can provide a realistic representation of a finished system that would allow users and systems personnel to review how the system or product would work. This can provide a benefit when changes are determined to be needed.

Prototype

"A __________ _______ __________ is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including footnotes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a _________ _________ ________ for purposes of financial statements that are filed or furnished with the SEC."

Public Business Entity

Definition 1: A _________ __________ is a business entity or a not-for-profit entity that meets any of the following conditions: It has issued debt or equity securities or is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets). It is required to file financial statements with the Securities and Exchange Commission (SEC). It provides financial statements for the purpose of issuing any class of securities in a public market. Definition 2: A ________ ________ is an entity that meets any of the following criteria: Has equity securities that trade in a public market, either on a stock exchange (domestic or foreign) or in an over-the-counter market, including securities quoted only locally or regionally Makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market Is controlled by an entity covered by the preceding criteria; that is, a subsidiary of a public entity is itself a ______ _______

Public Entity

The term "________ _________" is in reference to a tax arrangement allowed by a private letter ruling involving a rabbi. A grantor trust is set up to fund compensation for a group of managers or executives. The goal is to provide a benefit that is not taxable to the recipients until some later date when they actually receive compensation. To qualify for no current taxation, the trust agreement must explicitly state that the assets of the trust are available to satisfy the claims of general creditors in the event of bankruptcy of the employer.

Rabbi Trust

The ____________________________ is the rate of interest that, at a given date, causes the aggregate present value of (a) the lease payments and (b) the amount that a lessor expects to derive from the underlying asset following the end of the lease term to equal the sum of (1) the fair value of the underlying asset minus any related investment tax credit retained and expected to be realized by the lessor and (2) any deferred initial direct costs of the lessor.

Rate Implicit in the Lease

A ___________ is the acquisition of goods and service by paying for them. "___________" is a term formerly used for a method of accounting for a business combination in which one company, the parent, acquires voting stock from the stockholders of another company by paying cash, transferring noncash assets, or incurring debt. ____________ resulted in new ownership of the acquired entity. The __________ method of accounting for business combinations and consolidations has been superseded by the acquisition method, which differs in some respects. The acquiring company records as its investment the fair value of the acquired net assets (assets acquired minus liabilities assumed). The difference between the fair value of the acquisition and the sum of the fair values of identifiable tangible and identifiable intangible assets less liabilities is recorded as goodwill. Occasionally, the fair value received exceeds the consideration given in an acquisition, leading to recognition of a gain on bargain purchase. Acquisition accounting is appropriate when the parent company exercises control over the subsidiary. If the parent does not hold 100% of the subsidiary equity, then a noncontrolling interest also exists. The fair values of the assets and liabilities of the subsidiary are consolidated with the book values of the parent in preparing financial statements. Reported income of an acquiring corporation includes the parent's share of the acquired entity's net income adjusted for the amortization of any revaluations of subsidiary assets and liabilities to fair value.

Purchase

A __________ __________ is a contract with a supplier to purchase a specified quantity of materials during a specified period at an agreed unit cost; to "lock in" specific prices for needed items of inventory. It may or may not be subject to revision or a cancellation period to end the contract: Under __________ __________ that are subject to revision or cancellation: Possible future losses that can be reasonably estimated and are material in amount must be disclosed as a contingency. Under ________ ________ that are not subject to revision or cancellation: Possible future losses (and the related liability), when the loss is probable and can be reasonably estimated and is material in amount, must be recorded in the accounts and reported in the financial statements. (FASB ASC 330-10-35-17)

Purchase Commitment

In a _________ _____________, the lessor offers the lessee the option to purchase the leased asset at a significantly discounted amount from the expected fair value of the asset at the time the purchase option becomes exercisable.

Purchase Option

A _______ is a transferrable option or offer to deliver a stated quantity of either equity securities or a commodity at a specified exercise or strike price on or before a specified expiration date. ______ are purchased by investors who anticipate that the market price will decline below the strike price and they can then exercise their option and obtain securities or commodities at a price less than the strike price and make profits. Conversely, if the price rises they would incur losses.

Put

In SFAC 2, the hierarchy of accounting qualities was a ranking of the qualities of accounting information. SFAC 8.3 replaced the "hierarchy" with "Qualitative Characteristics of Useful Financial Information," which support the overriding criterion of decision usefulness, within pervasive cost-benefit and materiality constraints. These characteristics are a listing of the qualities to be sought when accounting choices between alternative methods are made. SFAC 8.3 includes the pervasive constraint that the benefits of the information must exceed the cost of acquiring and presenting the information (cost-benefit analysis), and ends with materiality as the threshold for recognition. Between these constraints, the hierarchy presents user-specific qualities, such as understandability, separate from decision-specific qualities. The primary decision-specific qualities are relevance and faithful representation. Ingredients of these qualities are: relevance (predictive value, confirmatory value, or both) and faithful representation (complete, neutral, and free from error). Enhancing qualitative characteristics are comparability, verifiability, timeliness, and understandability.

Qualitative Characteristics of Useful Financial Information

A ______ __________ is a modification of the capital structure of a corporation to eliminate a retained earnings deficit without the need for formal bankruptcy proceedings. It basically involves three steps: Any overvalued assets (or understated liabilities) are adjusted against retained earnings. The debit balance in retained earnings is eliminated against additional paid-in capital and/or by reducing the par or stated value of the stock with a corresponding increase to retained earnings. If additional paid-in capital is insufficient to absorb the deficit, the par value of capital stock is reduced, with a corresponding increase in APIC (to avoid a debit balance in APIC).

Quasi - Reorganization

__________ _________ are current assets that can be converted into cash within a short period of time, such as a month. _________ _________ include unrestricted cash on hand and in banks, marketable debt and equity securities, and accounts receivable due within one month.

Quick Assets

The _______ ______ is a liquidity ratio that measures the firm's ability to discharge currently maturing obligations from most liquid (quick) current assets, cash, marketable equity securities (MES), and accounts receivable (AR). It is more precise than the current ratio because only highly liquid assets are used (i.e., inventories—less liquid and more likely to incur losses in the event of liquidation—and prepaid assets are excluded). It measures immediate liquidity. The computation is Quick assets ÷ Current liabilities or (Cash + MES + AR) ÷ Current liabilities. There are limitations on use of this ratio. Accounts receivable may be subject to a lengthy collection period and may have to be factored at less than carrying value to convert to cash immediately. Marketable equity securities are subject to fluctuations in market conditions that affect their liquidation amount.

Quick Ratio

An equity security has a readily determinable fair value if it meets any of the following conditions: The fair value of an equity security is readily determinable if sales prices or bid-and-asked quotations are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter (OTC) market are publicly reported by the National Association of Securities Dealers Automated Quotations systems or by OTC Markets Group Inc. Restricted stock meets that definition if the restriction terminates within one year. The fair value of an equity security traded only in a foreign market is readily determinable if that foreign market is of a breadth and scope comparable to one of the U.S. markets referred to above. The fair value of an equity security that is an investment in a mutual fund or in a structure similar to a mutual fund (that is, a limited partnership or a venture capital entity) is readily determinable if the fair value per share (unit) is determined and published and is the basis for current transactions.

Readily Determinable Fair Value

___________ is the process of converting noncash resources and rights into money (specifically, the sales of assets for cash or claims to cash—thus, realized (unrealized) refers to revenues or gains or losses on assets sold (or unsold).

Realization

___________ __________ is "the chance of the future event or events occurring is more than remote but less than likely."

Reasonably Possible

___________ is the process of formally recording or incorporating an item in the financial statements of the entity. (SFAC 6.143) Four fundamental recognition criteria are (subject to the pervasive cost-benefit constraint and the materiality threshold): Definitions: The item must meet the definition of an element of financial statements. Measurability: The item has a relevant attribute that can be quantified with sufficient reliability. Relevance: The information about it is capable of making a difference in user decisions. Faithful representation: The information is representationally faithful, complete, unbiased, and error-free. SFAC 5.63-.87 Revenues and gains are recognized when they are: realized or realizable or earned. SFAC 5.83 Expenses and losses are recognized when one of the following has occurred: Consumption (using up) of benefit Occurrence or discovery of loss of future economic benefit SFAC 5.85 "Realized" and "recognized" are not synonymous. There are seven accepted criteria for revenue recognition: Point of sale Production and delivery—recognize prepayment (magazine subscription) Percentage of completion—long-term contract With passage of time—rent, interest Completion of production (before sale)—when product is readily salable at determinable prices without significant effort Completed transaction—in exchange for noncash assets Installment basis—when cash is collected

Recognition

The __________ ___________ is the amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment. However, if a loan is a hedged item in a fair value hedge, the amount of that loan's __________ __________ should include the unamortized amount of the cumulative fair value hedge adjustments.

Recorded Investment

____________ refers to the provision of preferred stock that under specified conditions and at the option of the stockholder shares can be returned to the issuer for a specified price (usually greater than the original issue price) within a specified time period. ______________ shares are not considered treasury shares.

Redeemable

To _____________ is to replace existing debt or owner's equity with new debt or equity, generally for a lower interest rate or more favorable terms. For example, a 20-year, 11% bond issue is called and the called bonds are financed with the proceeds from a new 20-year, 8% bond issue. An issued or preferred stock is called and the called stock is financed with the proceeds from the issuance of common stock.

Refinanced

___________ ___________ is an SEC (Securities and Exchange Commission) regulation that governs the form, content, and requirements of financial statements that must be included in the registration statement and the annual report (10-K) filed with the SEC.

Regulation S-X

In government accounting, _____________ is an interfund transaction which repays one fund (Fund 1) for expenditures (or expenses) initially recorded in that fund but properly attributable to another fund (Fund 2). _______________ is not an interfund transfer. ________________ should not be displayed in the financial statements. The transaction increases expenditures (or expenses) in the ____________ (paying) fund (Fund 2) and decreases expenditures (or expenses) in the reimbursed (receiving) fund (Fund 1).

Reimbursement

The __________ _________ ________ ________ is similar to a gross profit method and is used to allocate inventory cost and determine cost of sales in conjunction with a sale. Under the _________ ________ _________ ___________, cost of sales is calculated as a percentage of net sales using a cost-of-sales percentage—the ratio of total estimated cost (including costs to complete, if any) to total estimated time-sharing revenue. Time-sharing revenue is calculated as total expected future revenue adjusted for total expected future bad-debt expense.

Relative Sales Value Method

___________ is one of the qualities of accounting information. It is a fundamental decision-specific quality of decision usefulness and the capacity of information to "make a difference." ____________ financial information is capable of making a difference in the decisions made by users. Information may be capable of making a difference in a decision even if some users choose not to take advantage of it or already are aware of it from other sources. Financial information is capable of making a difference in decisions if it has predictive value, confirmatory value, or both.

Relevance

According to FASB ASC 830-10-45-17, if an entity's books and records are not kept in its functional currency, _____________ into the functional currency is required. Monetary balances are translated by using the current exchange rate and nonmonetary balances are translated by using historical exchange rates. If the U.S. dollar is the functional currency, _______________ into the reporting currency (the U.S. dollar) obviates translation.

Remeasurement

___________ __________ is the equivalent expenditure that would have to be made at that date in the ordinary course of business to procure corresponding utility (benefit). Replacement cost is the current market cost. When an asset's value is determined by the cost of replacing it, the valuation approach is called cost-based valuation. With this method, some adjustment is usually made for deterioration (wear and tear).

Replacement Cost

The following terms and descriptions are taken from FASB ASC 280-10-50: Operating segments that meet one of the following quantitative tests are reportable segments (FASB ASC 280-10-50-12): Segment revenue (both to external customers and intersegmental) is at least 10% of total revenue of all operating segments. The absolute amount of segment profit (or loss) is at least 10% of all operating segments with a profit (or loss). Operating segment assets are at least 10% of total assets. ________ _________ must report their revenue, profit (or loss), assets, and other related items (FASB ASC 280-10-50-22). Enterprises must report the extent of reliance on major customers—those who comprise at least 10% of sales (FASB ASC 280-10-50-42).

Reportable Segments

A _________ __________ is an entity or group whose financial statements are being referred to. Those financial statements reflect any of the following: The financial statements of one or more foreign operations by combination, consolidation, or equity accounting Foreign currency transactions

Reporting Entities

A ________ ________ is the level of reporting at which goodwill is tested for impairment. A ________ _________ is an operating segment or one level below an operating segment (also known as a component).

Reporting Unit

___________ __________ has been replaced by "faithful representation" by SFAC 8.3, QC5.

Representational Faithfulness

Within a government's comprehensive financial report (CAFR), the financial section must include, in addition to the Basic financial statements, _________ _________ _________ (_____) other than Management's Discussion and Analysis. It is presented immediately following the notes to the financial statements. RSI is an essential part of financial reporting and should be presented with, but not in, the basic financial statements. It may include budgetary comparison schedules, information about the modified approach for reporting infrastructure assets, and employee benefit information.

Required Supplementary Information (RSI)

_________ _____ _________ (_______) includes costs incurred in a planned search or critical investigation aimed at the discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, developing a new process or technique, bringing about a significant improvement to an existing product ("_________"), or translating research findings or other knowledge into a plan or design for a new product or process ("____________"). R&D is expensed as incurred. (FASB ASC 730-10-25-1) _______ includes materials, equipment, and facilities with no alternative use, personnel, intangibles purchased from others, contract services, and an allocation of indirect costs. _______ acquired as part of a business acquisition may be capitalized. Capitalized _______ should be reviewed periodically for impairment.

Research and Development

A "___________" is the term formerly used to designate portions of fund balance not available for expenditure or legally segregated for a specific future use. The Fund Balance section of the Balance Sheet should be reported in specific categories as circumstances require: Nonspendable reflects the value of prepaid or inventory items that are not monetary and will not support spending. Restricted reflects the value of assets whose use has previously been designated by an external party, such as a grant. Committed reflects the value of assets whose use has previously been designated by the highest level of government, typically the legislature or city council. Assigned reflects the value of assets whose use has been previously designated by management without action by the highest level of authority in the government. The amount of resources to be set aside to cover encumbrances at year-end is usually designated either committed or assigned. Unassigned reflects the value of General Fund assets whose use is not previously designated. Only the General Fund has an Unassigned category of Fund Balance. GASB 1800.165 Note: Memoranda of outstanding purchase orders in governmental funds still use the term "__________" in the entry that debits Encumbrances and credits Fund balance—reserved for encumbrances. These memoranda are removed before preparing the year-end balance sheet. The amounts of outstanding purchase orders are included in the balance sheet within the "committed" or "assigned" categories of fund balance depending on whether the purchase order had been approved by the highest level of government or a designee.

Reserve

Private not-for-profit entities may maintain funds, including restricted funds, for internal recordkeeping purposes. Restrictions on the use of the not-for-profit's resources are reported as restrictions of net assets. Private not-for-profit organizations do not prepare external financial reports on a fund basis.

Restricted Fund

_____________ is changing the debt or equity structure of an entity (e.g., debt restructuring and capital restructuring). In a debt restructuring, creditors grant concessions to the debtor with the hope that they will receive some repayment of the amounts lent rather than forego all of the amounts lent. The concessions by creditors may be voluntary or they may be forced by law or the courts. In a capital restructuring, the characteristics of the stock may be changed (i.e., par value) or one class of stock may be substituted for another class of stock.

Restructuring

The ________ __________ is a method of valuing inventory utilizing retail prices. Inventory at retail is converted to cost (using any of the cost flow assumptions, LIFO, FIFO, average cost) or to the lower of cost or market based on the cost-to-retail ratio. The method requires additional information in addition to units and unit costs: beginning inventory and purchases at retail and adjustments to original sales price, such as markups, markdowns, and cancellations of markups and markdowns.

Retail Method

_________ _________ are an increase in net assets from results of operations, retained by the corporation for use in the enterprise. They are internally generated financing or the corporation's undistributed earnings. They are accumulated earnings, less accumulated losses and dividends paid, from inception. Retained earnings are a major source of owners' equity and can be viewed as additional investments by the owners as foregone dividends. Negative balance is called a deficit. _________ __________ may also be decreased by purchase of treasury stock at a price higher than the amount originally received for the stock. __________ ____________ may be appropriated (i.e., restricted as to use) by: contractual specification (e.g., bond covenants), legal requirement (e.g., by state law), or management discretion (e.g., for future expansion). ____________ _________ are increased by net income, prior-period adjustments, and quasi-reorganization. Retained earnings are decreased by net loss, prior-period adjustments, cash, property, scrip, stock dividends, and treasury stock and stock retirement transactions.

Retained Earnings

With __________ ____________ of an accounting change: the cumulative effect of the change is recorded as an adjustment (correction) to the beginning balance of retained earnings ("prior period adjustment") in the year of change. the cumulative effect of the change is reported by restating the prior years' financial statements as if the change had been applied in all prior periods presented (part of the effect will be included in the beginning balance of the first year presented) as a catch-up adjustment for prior periods not presented; the effect of the change is carried back to prior periods, it is notallocated to current and future periods. "Retroactive" means back in time. Note disclosure of the change, with explanation and justification, and of the impact on income and EPS is also required.

Retroactive Recognition

________ ___ _____ _________, also called return on investment, is a profitability ratio that measures the productivity of assets in producing income and the efficiency of use of invested capital. However, it is most commonly used to measure the performance of investment centers. This measurement is valuable because it focuses on the required investment of capital. The computation is operating income divided by average invested capital. Return on investment (ROI) can be divided into two elements: Profit margin = Operating income ÷ Sales Invested capital turnover = Sales ÷ Average invested capital There are limitations on use of this ratio. Example: Accrual income includes estimation and does not reflect true cash return, invested capital is based on historical cost of assets and does not reflect current values (invested capital should be total assets less any intangible assets that do not contribute directly to the generation of sales), and often the interest expense (net of tax effects) is not added back to net income.

Return on Total Assets

_________ ________ are expenditures for ordinary repairs and maintenance for floating assets (assets bought for resale, such as cost of goods sold and raw materials) and for everyday expenses such as rent and salaries. They are expensed as incurred. (Contrast to capital expenditure.)

Revenue Expenditures

____________ are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations. (FASB ASC Glossary) ____________ are similar to gains; the distinction depends on the nature of the entity, its operations, and its other activities. The primary purpose of distinguishing between revenues and gains is presentation and display. ____________ must be earned and realized/realizable before they can be recognized.

Revenues

A _________ _______ is another name for a reverse repurchase agreement. According to the FASB ASC Glossary, this is "a transaction that is accounted for as a collateralized lending in which a buyer-lender buys securities with an agreement to resell them to the seller-borrower at a stated price plus interest at a specified date or in specified circumstances. The receivable under a reverse repurchase agreement refers to the amount due from the seller-borrower for the repurchase of the securities from the buyer-lender. In certain industries, the terminology is reversed" and such an agreement is referred to as a "repo."

Reverse Repo

The ________ _____ __________ involve the right to take precedence in the receipt of net assets from the dissolution or bankruptcy of an entity, usually said of a partnership or of any entity in bankruptcy.

Rules of Distribution

A ________ is the transfer of title from one party to another for a price. Sales of goods are governed by Uniform Commercial Code (UCC) Article 2. A sale may be a present sale (consummated by the making of the contract for sale) or an agreement for a future sale (a contract to sell). (UCC 2-106) The general obligations of the parties to a sale are that the seller is to transfer and deliver the goods and the buyer is to accept the goods and pay in accordance with the contract. (UCC 2-301) Elements of a _______ include the following: Parties must have legal capacity to contract Price Valid subject matter (i.e., the goods to be sold) have the following: Validity—i.e., goods are not illegal or against public policy Actual existence and identity—i.e., existing goods are identified to the contract for present ________, and goods are not existing, identified to the contract, and represent a contract to sell for sale of future goods Subjective good faith (honesty in fact)—merchants must also meet the objective standard of good faith.

Sale

A lessor shall classify a lease as a ______-______ _________ and a lessee shall classify a lease as a finance lease when the lease meets any of the following criteria at lease commencement: The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

Sales Type Lease

_________ _________ is the amount estimated to be recoverable on disposal (by sale, trade-in, or other means) or retirement from service of an operational asset (net of any costs of disposal, such as dismantling and selling expenses). The remaining carrying amount, after deduction of ___________ ___________, is then fully depreciated (depreciated to the end of the asset's useful life).

Salvage Value

The __________ _______ ____ ________ is a federal statute regulating the initial public offering (IPO) and private placement of securities. It creates liability of the seller (the company and all officers, directors, etc. and experts, including accountants, associated with the financial statements and the offering) to all third-party purchasers of the securities. It creates third-party beneficiary liability, eliminates the privity defense, and regulates the initial public offerings of securities through the mails or in interstate commerce by requiring registration of securities and full public disclosure of all material information about the securities and the company. It is designed to protect the unsophisticated investing public. The basis for a claim against an accountant under this statute is a false statement or omission of a material fact in the audited financial statements. There is no need to prove negligence, fraud, reliance, or even proximate cause. The burden of proof shifts to the accused (i.e., the accountant). Defenses include proof of reasonable investigation (due care) or that the misstatement is not material.

Securities Act of 1933

____________ ________ ______ ___________ (SEA '34) is a federal statute that regulates the trading of securities that are already issued and outstanding. The Act created the Securities and Exchange Commission (SEC) and established requirements and provisions relating to the registration and operation of stock exchanges and brokers. The Act requires companies whose stock is publicly traded to register with, and report periodically to, the SEC. It supervises market activities, such as proxy solicitations, tender offers, insider trading, and short-swing profits, and strengthens and enforces antifraud provisions (SEA '34 Section 10(b) and SEC Rule 10b-5).

Securities Exchange Act of 1934

___________ ________ ________ ___________ (_______) is a federal government agency charged with the responsibility of writing rules consistent with federal security laws, investigation of violations, maintenance of financial disclosure documentation, and initiation of action against violators of federal securities acts. The ________'s main office is in Washington, D.C., but it has "enforcement" and field offices all over the country. The _______ is charged with the oversight of the Federal Securities Act of 1933, the Federal Securities Exchange Act of 1934, and the Foreign Corrupt Practices Act. The agency serves to govern the registration, offering, sale, etc. of stocks, bonds, notes, convertible debentures, warrants, or other financial documents involving investments and purchases. In addition to writing regulations, the _______ reviews registration statements for compliance with disclosure requirements. The SEC does not determine whether the information provided to investors is accurate or truthful, nor does the ________ determine whether the terms of the offering are fair or reasonable to investors. The mission of the _____ is to protect the integrity of capital markets through enforcement of financial disclosure laws that apply when a business entity attempts to raise capital by selling ownership to investors. The _______ defines what information prospective investors must receive from offerors and what information the entities must continue to report to their shareholders if the entity has a certain number of owners.

Securities and Exchange Commission (SEC)

A __________ is a share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer that has all of the following characteristics: It is either represented by an instrument issued in bearer or registered form or, if not represented by an instrument, is registered in books maintained to record transfers by or on behalf of the issuer. It is of a type commonly dealt in on ___________ exchanges or markets or, when represented by an instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for investment. It either is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.

Security

A _________ is a functional or responsibility area within a business that can be reported upon separately. FASB ASC 280-10-50-1 requires that general-purpose financial statements include selected information reported on a single basis of segmentation. The method the Financial Accounting Standards Board (FASB) chose for determining what information to report is referred to as the management approach. The management approach is based on the way that management organizes the __________ within the enterprise for making operating decisions and assessing performance. Consequently, the _____________ are evident from the structure of the enterprise's internal organization, and financial statement preparers should be able to provide the required information in a cost-effective and timely manner.

Segment

At the commencement date, ___________ _______ _____ _______ equals: the fair value of the underlying asset or the sum of (1) the lease receivable and (2) any lease payments prepaid by the lessee, if lower; minus the carrying amount of the underlying asset net of any unguaranteed residual asset; minus any deferred initial direct costs of the lessor.

Selling Profit or Loss

A business enterprise is a discrete unit of accountability, separate and apart from its owners and other entities. This may or may not concur with the legal sense, i.e., partnerships and proprietorships are not separate from the owners in a legal sense. For example, the private residence of the owner is not an asset of the reporting entity.

Separate Entity

_________ _________ are a set of related bonds issued at the same time but which mature at intervals over time, e.g., total issue of $90 million matures in six installments of $15 million each at 3-year intervals beginning in year 5.

Serial Bond

_________ __________ is the actuarial present value of pension benefits attributed by the pension benefit formula to services rendered by employees during the current period. It is provided by the actuary and acts to increase PBO. It will always be present as a component of (increase in) net periodic pension cost. _________ ________ incorporates assumed future compensation levels and is computed annually on the assumption that the pension plan will continue indefinitely.

Service Cost

________-________ ____________ are those obligations whose liquidation is reasonably expected to require either the use of existing resources properly classified as current assets or the creation of other current liabilities (FASB ASC 210-10-45-6). Maturity is within one year for a _______-_________ ___________, or the operating cycle, if it is longer. Obligations for those items that have entered into the operating cycle (e.g., materials), collections received in advance of delivery of goods or performance of services, and debts that arise from operations directly related to the operating cycle (e.g., wages, commissions, rents, royalties, taxes) (FASB ASC 470-10-45-13) are considered ________-_______ ____________, as well as those long-term obligations that are or will be callable (due on demand) by the creditor (FASB ASC 470-10-45-13). ________-__________ _____________ include accounts (trade) payable, short-term notes payable, current maturity amounts of long-term obligations, unearned revenue, accrued expenses (salaries, interest, and taxes), and obligations that by their terms are callable.

Short-Term Obligations

_________ _________ refers to the ability to exert substantial control over the management or operating and financial policies such that the entity might be prevented from fully pursuing its separate interests. It is the ability to direct or cause the direction of the management and policies of an enterprise even though the investor may own less than 50% of the voting stock of the enterprise. __________ _________ is defined with respect to investment in equity securities as ownership of 20% or more of the voting stock. It is also evidenced (in cases of less than 20% ownership) by such circumstances as representation on the board of directors, participation in policymaking processes, material intercompany transactions, interchange of managerial personnel, or technological dependency. (FASB ASC 323-10-15-6) _____________ __________ is presumed in cases of 20% or more ownership unless proven not to exist because of the following: Opposition of investee (e.g., litigation) By written, signed agreement between the investor and investee Majority ownership is concentrated among a small group that operates the investee without regard to the views of the investor. The investor tries and fails to obtain additional information not made available to other investors. The investor tries and fails to obtain representation on the board of directors.

Significant Influence

___________ _________ are productive assets that are of the same general type, perform the same function, or are employed in the same line of business, e.g., land for land, a warehouse for a warehouse, a truck for a truck, a crane for a crane.

Similar Assets

A _______-_______ income statement has all of the expenses subtracted from all of the revenues for income from continuing operations. It does not show gross margin (profit) and does not classify revenues, expenses, gains, and losses into various categories. This income statement does not separate operating results from other nonoperating activities—other revenues and gains and other expense and losses. This income statement may classify expenses by function—manufacturing, selling, and administrative. The alternative is a multiple-step income statement.

Single-Step

A _______ _________ is money regularly set aside for a specific purpose, usually to redeem outstanding bonds or preferred stock or to replace capital assets, which is not available to the entity for other purposes. A _________ __________ is frequently required by bond covenants. Pension plan assets are a form of ________ ________ (funds set aside to pay retirement benefits). The objective is to have cash available at some future date for a specified purpose.

Sinking Fund

_________ constitutes the instructions that turn hardware, circuits and chips, into a computer. Without the software, the computer is an expensive doorstop. There are two basic categories of __________: system __________ and application ___________. In personal computers, system ____________ includes the operating system (such as DOS, the Macintosh operating system, OS/2, and Windows) and system utilities like backup programs (such as BrightStar ARCserve Backup by CA, Inc.; Backup Exec and NetBackup by Symantec; and OpenView Storage Data Protector by Hewlett-Packard) and file management programs (such as Windows Explorer and ExplorerXP). This _________ runs the computer but does not perform any specific problem-solving functions. In mainframe computers, this may be MVS, AS400 OS, or other systems. Application _____________ provides specific problem-solving or work tasks such as word processing, spreadsheets, database management, inventory management, deposit accounting, and payroll. Application ____________ will not run unless system _________ is present to run the computer itself. The application software will call many functions from the system ____________ (such as routines) to move the data (such as a letter) from the RAM (or working memory) to the disk (or storage device).

Software

A _______ _________________ is a business form of one person conducting business as an individual. It is not a legal, taxable entity separate from the owner. The owner is personally liable for the debts of the proprietorship. It is governed by the laws of contracts and agency. The owner may hire employees or agents (or independent contractors). (Contrast to partnership and corporation.)

Sole Proprietorship

The _________ ___ _______ ___________ is a basic personal financial statement. It does not use "current" and "noncurrent" classifications. It presents the following (on an accrual basis): Estimated current values of assets Estimated current amounts of liabilities Estimated income taxes on the difference between the estimated current value of assets and estimated current liabilities and their tax bases Net worth (residual) Estimated current value of an investment in a separate entity (e.g., partnership, closely held corporation) should be shown as a single amount, as a separate investment.

Statement of Financial Condition

A __________ _________ ________ ___________ is a long-term borrowing by a government to finance a capital improvement that will be repaid in part or in full by the property owners deemed to derive particular benefit from the improvement. Governments' liability for __________ _________ ___________ varies. Special assessment debt that is a general obligation, which could be all or just a portion of the entire debt issue, should be reported in the governmental activities column of the government-wide statement of net position. __________ ___________ _________ that is to be repaid from proprietary fund revenues should be reported as a liability of the proprietary fund and in the business-type activities column of the government-wide statement of position. ___________ ________ ________ for which the government is not obligated is not displayed on the financial statements.

Special Assessment Debt Issue

In governmental accounting, _________ ________ _________ are governmental funds used to account for the proceeds of specific revenue sources (other than trusts for individuals, private organizations, or other governments or for major capital projects) that are legally restricted to expenditure for specific purposes. ________ _______ ________ are accounted for on the modified accrual basis. Some ________ ________ _________ are: gasoline excise taxes to be used for street maintenance and hotel/motel bed taxes to be used for industrial development or to be allocated to the arts. If the expenditures are for purposes normally financed from the general fund, the expenditures can be recorded in the general fund and the appropriate amount transferred. Accounting for special revenue funds is exactly the same as for the general fund (budgetary accounts are also used). GASB 1300.104-.107

Special Revenue Fund

__________ ___________ is a cost flow assumption that relates the cost flow to the specific flow of the physical goods. It assigns the actual acquisition cost to each item and clearly identifies this cost with the item at all times through the time of sale. It is usually used with large or unique or expensive items that are handled in small quantities such as jewelry, cars, and antiques. Each individual item is tagged or numbered when purchased or manufactured so that the exact, actual cost of the item can be used to value the item in inventory until sale and can be expensed to cost of goods sold after sale.

Specific Identification

"____________" pertains to activities or investments that involve great uncertainty and thus risk. __________ investments are those for which the possible range of outcomes is very wide, and there is little information on which to base good judgments about which outcomes are most likely. Usually, speculative investments involve both high risk and high possible returns.

Speculative

The complete set of financial statements for a not-for-profit entity includes a _________ ____ ____________, which is analogous to the income statement of a business entity. In governmental accounting, a ___________ _____ __________ is required for government-wide financial reporting. The formats of the not-for-profit and the governmental statement of activities differ.

Statement of Activities

The ______ _____ _____ ________ is one of the required financial statements. Cash receipts and cash payments are classified into three categories: Operating activities—all transactions and other events that are not investing or financing; generally include transactions that enter into the determination of net income. These include production and delivery of goods and services, interest and dividends received, and payment of interest. Investing activities—all transactions related to the making or collecting of loans and the acquiring and disposing of debt, equity instruments, or property, plant, and equipment. Financing activities—all transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment, and to obtaining and repaying debt. Separate disclosure of noncash investing and financing activities is also required. Examples of such activities include obtaining an asset by entering into a finance lease, by exchange for another asset, or by the issuance of stock or debt. __________ _____ _____ ________ can be prepared using either the direct or the indirect method. FASB ASC 230-10-45 and 10-55 In governmental accounting, cash flow statements are presented for proprietary funds and governmental entities engaged in business-type activities. The direct method must be used and there are four headings in the statement: cash flows from operating activities, from noncapital financing activities, from capital and related financing activities, and from investing activities. (GASB 2450)

Statement of Cash Flows

The ____________________________________________ should be used to report additions to and deductions from pension (and other employee benefit) trust funds, investment trust funds, private-purpose trust funds, and custodial funds. The ________________________________________________ should disaggregate additions by source including, if applicable, separate display of the following: Investment earnings Investment costs (including investment management fees, custodial fees, and all other significant investment-related costs) Net investment earnings (investment earnings minus investment costs). Investment-related costs should be reported as investment costs if they are separable from (a) investment earnings and (b) administrative costs. The ______________________________________________ should disaggregate deductions by type and, if applicable, should separately display administrative costs.

Statement of Changes in Net Position

The __________ ____ _______ ___________ provides information about the entity's assets, liabilities, and equity and their relationships to one another at a particular point in time. A ____________ __________ ______ ___________ shows a snapshot of the firm's financial position on a given date, delineates the enterprise's resource structure (major classes and amount of assets) and its financing structure (major classes and amount of liabilities and equity), and provides users with information to assess the entity's liquidity, financial flexibility, profitability, and risk. SFAC 8.1, OB12 The statement is based on the fundamental accounting model Assets = Liabilities + Equity.

Statement of Financial Position

A _______________________________________ presents a liquidating entity's net assets available for distribution to investors and other claimants as of the end of the reporting period.

Statement of Net Assets in Liquidation

_______________________________________________________ together indicate the extent to which and the ways in which the equity of the entity increased or decreased from all sources other than transactions with owners during the period. They provide information about the causes of changes in assets and liabilities, including the results of ongoing major or central operations, the results of incidental or peripheral transactions, and the effects of other events and circumstances stemming from the environment.

Statements of Earnings and Comprehensive Income

In not-for-profit accounting: A ______________ is a statement by a donor or contributor that creates a condition or restriction on the use of resources transferred to the not-for-profit entity.

Stipulation

________ ________ ________ (_______-) are rights awarded to key employees to receive a cash bonus based on the change in the market price of capital stock over a specified time period (from the date of grant to the exercise date). It is a right to participate in the appreciation of the value of the stock that is given to employees. (Contrast to stock option.)

Stock Appreciation Rights (SAR)

_______ _____________ are distributions of the corporation's own stock (treasury or newly issued shares) to stockholders in proportion to the number of outstanding shares held. They do not change the par value per share or the shareholder's proportional interest in the corporation, but they do increase the number of shares issued and outstanding. A _______ ____________ does not change assets, liabilities, or totalstockholders' equity. It merely transfers amounts between equity accounts. Accounting for dividends represents a disbursement (credit) to the capital stock account(s) and a reduction (debit) to Retained Earnings. _______ ___________ are revocable up until the date of issuance (distribution) and may involve some special accounting issues. FASB ASC 505-20-20 _______ ____________ are used in calculating the weighted-average number of shares outstanding for EPS (earnings per share) computations and are given retroactive treatment "as if" the shares had been outstanding for the entire period. _______ __________ represent return on investment to shareholders.

Stock Dividend

_________ ________ __________ are costs associated with the issuance of shares of stock, such as registration fees, underwriter commissions, attorney and accountant fees, printing costs, clerical, and promotional costs. _________ ________ _________ may be accounted for by the offset method (issue costs are deducted from the amount received from the sale of the shares) or as a deferred charge (an intangible asset) that is amortized over a reasonable period (e.g., five years). Costs subsequent to issuance (e.g., cost to maintain stockholder records, transfer costs, and dividend payment costs) are expensed as incurred.

Stock Issue Cost

A _______ __________ is a right to purchase shares of stock in accordance with an agreement, on payment of a specified amount. It involves the issuance of stock by the corporation. A _______ ___________ may be compensatory (considered part of compensation for services) (FASB ASC 718) and is usually made available to upper management only. It involves special accounting issues if it is compensatory. A ________ ____________ may be noncompensatory, in which case it is not considered part of compensation for services and does not involve special accounting issues.

Stock Option

_________ _________ are the right to purchase additional shares of stock in proportion to the number of shares held at a specified price within a specified time period. (It may take more than one right to buy one share.) The evidence of the ownership of stock rights is a warrant. Detachable warrants may be purchased and sold like any other security. If the corporation issues the stock rights to current shareholders or as nondetachable warrants attached to debt securities, no accounting entry is required (since no asset was distributed and no liability incurred). If the rights were exchanged for services received or issued, for detachable warrants attached to debt securities, with a stock dividend, or with an ESOP, special accounting issues are involved. The investor receiving the ________ ________ should allocate a portion of the carrying value of the stock already owned (or price paid for the bond) between the stock shares (bond investment) and the rights. The investor may exercise or sell the rights or allow the rights to expire. Compare to stock option and stock warrant.

Stock Rights

A ___________ ________ is an event occurring after the balance sheet date but prior to the issuance of the auditor's report, which has a material effect on the financial statements and therefore requires adjustment or disclosure in the statements. (AU-C 560) Two types of events require consideration: Events that provide additional evidence with respect to conditions that existed at the balance sheet date and which affect estimates in the financial statements require adjustment. Events that provide additional evidence with respect to conditions that did not exist at the balance sheet date but arose subsequent to that date do not require adjustment but may require disclosure.

Subsequent Event

A _______ ________ is an increase in the number of shares outstanding and a corresponding decrease in par value of each share. It has no effect on the shareholder's proportional interest in the corporation, on total shareholders' equity, or on retained earnings, but it does decrease earnings per share (EPS) because of the increase in the number of shares. It does not change the total EPS earned by each shareholder. No accounting entry is required. The primary purpose is to decrease the market price per share and stimulate market activity. FASB ASC 505-20-30-6 A _______ __________ is used in calculating the weighted-average number of shares outstanding for EPS computations and is given retroactive treatment "as if" the shares had been outstanding for the entire period (because the "new" shares are considered to be subdivisions of "old" shares). A _________ ________ represents return to shareholders on investment.

Stock Split

A _______ ___________ is a security that gives the holder the right to purchase additional shares of stock in accordance with terms of the instrument. It may be issued to current shareholders or attached to debt securities. The right to purchase additional shares of stock is in proportion to the number of shares held. Shares may be purchased at a specified price within a specified time period (it may take more than one right to buy one share). Warrants may be purchased and sold like any other security. If the corporation issues the stock rights to current shareholders or as nondetachable warrants attached to debt securities, no accounting entry is required (since no asset was distributed and no liability incurred). If the rights were (1) exchanged for services received or issued, (2) detachable warrants attached to debt securities, (3) with a stock dividend, or (4) with an ESOP, special accounting issues are involved.

Stock Warrant

A _____________ is the owner of a share of the corporation's common or preferred stock.

Stockholder

___________ __________ is total residual ownership interest in the corporation: net assets and total assets in excess of total liabilities. The source of equity should be specified and segregated: Contributed capital (paid-in capital): Capital stock, at par: CommonPreferredLess: Treasury stock (under the par value method) Other contributed capital: Contributed capital in excess of par (CCEP) (also called Additional paid-in capital (APIC)) on both common and preferredContributed capital from treasury stock (under the par value method or cost method) Donated capital Retained earnings (earned capital): Appropriated Unappropriated Unrealized capital Less: Treasury stock (under the cost method)

Stockholder's Equity

_________-_______ is a depreciation method based on an equal allocation of the cost of operational assets with the passage of time. It assumes that the useful life of the asset is used up evenly over time and charges a fixed amount per period to expense. Residual or salvage value is not used for computation of basis of an asset for tax purposes. This is one of the book/tax differences. Computation for the straight-line (SL) method: __________-_________ depreciation expense per year = Cost ÷ Useful life (years) The advantage of the ________-__________ method is that it is simple to compute. The disadvantage is that passage of time may not be representative of the use of the asset's benefits and may not match cost to revenue. ________-________ rate = 1 ÷ Useful life (years) The ________-_________ method is a method of allocation such that a constant dollar amount is recognized as revenue or expense each period. The _________-_________ method is commonly used for depreciation. Example: An asset costing $100,000, to be depreciated over 10 years by the straight-line method of depreciation, would be depreciated at $10,000 per year ($100,000 ÷ $10,000).

Straight-Line

The ________-________ ________ is a depreciation method based on an equal allocation of the cost of operational assets with the passage of time. It assumes that the useful life of the asset is used up evenly over time and charges a fixed amount per period to expense. The computation for the straight-line (SL) method is: _______-________ depreciation expense per year = (Cost - Residual value) ÷ Useful life (years) The advantage of the __________-________ _________ is that it is simple to compute. The disadvantage is that the passage of time may not be representative of the use of the asset's benefits and may not match cost to revenue. __________-________ rate = 1 ÷ Useful life (years) The __________-_______ _________ is a method of allocation such that a constant dollar amount is recognized as revenue or expense each period. The _______-________ ________ is commonly used for depreciation. Example: An asset costing $100,000, with a salvage value of $5,000, to be depreciated over 10 years by the straight-line method of depreciation would be depreciated at $9,500 per year (($100,000 - $5,000) ÷ 10).

Straight-Line Method

A _________ ________ is a debt instrument whose cash flows are linked to the movement in one or more indexes, interest rates, foreign exchange rates, commodities prices, prepayment rates, or other market variables. ________ ________ are issued by U.S. government-sponsored enterprises, multilateral development banks, municipalities, and private entities. The notes typically contain embedded (but not separable or detachable) forward components or option components such as caps, calls, and floors. Contractual cash flows for principal, interest, or both can vary in amount and timing throughout the life of the note based on nontraditional indexes or nontraditional uses of traditional interest rates or indexes.

Structured Note

A _________ is a transaction in which an underlying asset is re-leased by the lessee (or intermediate lessor) to a third party (the sublessee) and the original (or head) lease between the lessor and the lessee remains in effect.

Sublease

___________ is a ranking below another comparable item (e.g., ____________ debt) or a person with less authority.

Subordinate

_________ _________ is unissued shares of stock set aside to meet contracts (for the sale of a specified number of shares to be paid for at a later date) for shares sold but not yet paid for. _________ ________ is considered unissued until paid for in full; however, since the contract is legally enforceable, and the corporation has foregone the alternative use/sale of those shares, official accounting recognition must be given by appropriating the specified number of shares as "stock subscribed" as a component of capital stock section of stockholders' equity (offset by "Stock subscription receivable").

Subscribed Stock

A _________ is a corporation controlled, directly or indirectly, by another (parent) corporation where the control is usually by ownership of a majority (greater than 50%) of the outstanding voting stock. Power to control may also exist with a lesser percentage of ownership (i.e., by contract, lease, agreement with other stockholders, or court decree). A ___________ may be consolidated or unconsolidated with the parent for reporting purposes (FASB ASC 810-10-20)but is usually accounted for by the parent by the equity method.

Subsidiary

___________ _______ __________ is the meaning, essence, or quality of a transaction compared to the manner in which it is structured or executed. It is an essential element of full disclosure. __________ ______ ________ is the reporting of the economic substance of the transaction, event, or circumstance over the legal form of the transaction (i.e., the economic substance of the transaction determines the accounting treatment if the legal form of the transaction indicates a different treatment). The substance of the transaction should not be hidden by mechanics, rules, or technical terminology.

Substance Over Form

___________ _________ is a term applied by an auditor to indicate his opinion, based upon sufficient appropriate audit evidence, that an entity may not be able to continue as a going concern beyond a year from the period being audited. The absence of reference to ___________ ___________ in an auditor's report does not provide assurance as to an entity's ability to continue as a going concern, nor is an auditor required to perform audit procedures designed specifically to identify whether or not the entity may be able to continue as a going concern. However, an auditor may express ___________ ___________ in his audit of an entity if sufficient evidence indicates that the entity may not be able to continue as a going concern beyond a year from the period being audited.

Substantial Doubt

__________________________ is an accelerated depreciation method that applies a fraction, which decreases each period, to the acquisition cost (less residual value). It is based on the assumption that the productivity or revenue-generating power of the asset is relatively greater during the earlier years of its life or that maintenance expenses tend to increase during the later years. It produces results similar to double-declining balance. FASB ASC 360-10-35-7 Fraction computation: Numerator: years' digit in reverse order: 4, 3, 2, 1, Denominator: sum of the years' digits: 1 + 2 + 3 + 4 = 10, or n[(n+1) ÷ 2], where n = life in years [4 (5) ÷ 2] = 10. Fractions for each successive year: Year 1: 4/10 Year 2: 3/10 Year 3: 2/10 Year 4: 1/10 The computation is SYD depreciation = Fraction × (Cost - Residual value).

Sum-of-the-Years Digits

___________ ____________ is financial information outside of the basic financial statements. It may or may not be required by GAAP. __________ __________ not required by GAAP (by FASB or GASB pronouncements) is provided on a voluntary basis. It may be required by other regulatory agencies, e.g., the Securities and Exchange Commission (SEC) (Regulation S-K). The auditor has no responsibility to audit ____________ ___________. However, the auditor does have certain responsibilities with respect to such information, depending on the nature of both the information and the document containing the financial statements. (AU-C 720, 725, and 730)

Supplemental Information

In not-for-profit accounting, __________ consists of contributions, both restricted and unrestricted.

Support

According to the FASB ASC Glossary, __________ __________ are all activities of a not-for-profit entity (NFP) other than program services. Generally, they include the following: Management and general activities Fundraising activities Membership development activities

Supporting Activities

A ________ __________ is a financial transaction where there is generally a simultaneous exchange of assets (the swap) by counterparties for other different assets of comparable value.

Swap Transaction

"_______________" is said of the promise or order on commercial paper. It is not subject to, or limited by, any modifying circumstance or prerequisite. A promise or order is conditional if the instrument states that it is "subject to" or "governed by" another agreement or is to be paid "only" out of a particular fund or source (for a nongovernmental unit). An order or promise is not conditional although the instrument: states its consideration. refers to the transaction out of which it arose. states that it is secured by a mortgage or other security device. indicates a particular account, fund, or source from which payment may be drawn. states that it is to be paid "only" out of a particular fund or source (for a governmental unit). is payable only out of the entire assets of a partnership, trust, estate, or unincorporated association. states that it is drawn under a letter of credit. UCC 3-106

Unconditional

An ____________ is a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or other variable (including the occurrence or nonoccurrence of a specified event such as a scheduled payment under a contract). An ______________ may be a price or rate of an asset or liability but is not the asset or liability itself.

Underlying

An ___________ _________ is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The _________ __________ could be a physically distinct portion of a single asset.

Underlying Asset

___________ _____ __________ is a depreciation method based on the assumption that useful life decreases with production output rather than with the passage of time. The output can be measured as units of output or machine hours used. Depreciation expense varies with production. A proportionate part of cost is allocated to each unit of production. The computation is: Rate per unit = Cost - Residual value ÷ Useful life (in units) Depreciation expense = Rate per unit × Units of output, current year The advantages of this method are that it is simple and uses actual output. The disadvantage is that depreciation expense varies each year.

Units of Production

____________ _________ is debt for which the amount is disputed in good faith by the parties. Payment of a lesser amount discharges the obligation if the other party accepts the lesser amount. (Contrast to liquidated debt.)

Unliquidated Debt

_____________ __________ are inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.

Unobservable Inputs

____________ ________ __________ is the term formerly used to designate portions of total fund balance (total assets less total liabilities) not subject to existing financial commitments and available for future appropriation and expenditure. The designation for the category of Fund balance available for future appropriation and expenditure is "unassigned" in the General Fund. In other governmental funds, the "assigned" Fund balance may be available subject to the constraints on the particular fund.

Unreserved Fund Balance

An __________ ________ or transaction is a transaction or party (lender, seller, or other person) in which or in whose favor no security interest exists. An unsecured creditor has no priority over other creditors in bankruptcy proceedings; they share the residual equity on a pro rata basis. An unsecured creditor has no insurable interest in the life or property of the debtor.

Unsecured Party

________ _______ is the measurement of the benefit derived from the use of an operational asset, which may be measured in terms of time, units of production, or time of production (machine hours).

Useful Life

___________ is the management assertion that all assets, liabilities, revenues, and expenses have been included in the financial statements at the proper amount. (AU-C 315.A128) An example of a _____________ assertion is that accounts receivable have been included in the balance sheet at net realizable (i.e., collectible) amounts. A procedure to test this assertion would be to review the allowance for bad debts for adequacy (e.g., against historical collection records and against collections subsequent to period cutoff).

Valuation

__________ (contra) _____________ are balance sheet items that increase or decrease the carrying value of assets and that are part of the related asset and are not assets, or liabilities, in their own right. Examples include allowance for doubtful accounts, premium and discount on bonds, and accumulated depreciation.

Valuation Accounts

The _________ __________ represents the difference between cost and fair value. __________ ___________ is an adjunct or contra account of marketable equity securities and accounts receivable. The __________ ___________ may be a debit or credit balance—since marketable equitable securities are recorded at fair value per FASB ASC 320-10, value can exceed cost. The accounting treatment for changes in the ___________ ____________ depends upon the classification of the assets to which it refers: Accounts Receivable and Securities Classified as Trading Securities—included in the determination of net income of the period in which the changes occur Securities Classified as Available-for-Sale—included as a separate component of stockholders' equity

Valuation Allowance

A __________ ________ _________ is a legal entity subject to consolidation according to the provisions of the "__________ _________ ___________" subsections of FASB ASC 810-10,Consolidation—Overall. FASB ASC Glossary

Variable Interest Entities

__________ ________ __________ are payments made by a lessee to a lessor for the right to use an underlying asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Variable Lease Payments

__________ is an ingredient of reliability. _____________ helps assure users that information faithfully represents the economic phenomena it purports to represent. ____________ means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. Quantified information need not be a single point estimate to be ______________. A range of possible amounts and the related probabilities also can be ___________. ____________ can be direct or indirect. Direct ____________ means ___________ an amount or other representation through direct observation; for example, by counting cash. Indirect ______________ means checking the inputs to a model, formula, or other technique and recalculating the outputs using the same methodology. An example is ____________ the carrying amount of inventory by checking the inputs (quantities and costs) and recalculating the ending inventory using the same cost flow assumption (for example, using the first-in, first-out (FIFO) method). It may not be possible to ____________ some explanations and forward-looking financial information until a future period, if at all. To help users decide whether they want to use that information, it normally would be necessary to disclose the underlying assumptions, the methods of compiling the information, and other factors and circumstances that support the information.

Verifiability

When an employee is ___________, it means the employee has a right to receive a pension benefit even though the employee does not remain an employee until retirement. Being vested has a major effect on pension funding, because ___________ benefits represent an add-on benefit which increases both pension expense and pension funding.

Vested

The _________ __________ _____________ is the actuarial present value of __________ ___________ (FASB ASC 715-30-20). It is provided annually by the actuary and represents an add-on benefit and cost (in addition to ABO). It is not used in the usual accounting for pension plans and must be honored when the company is involved in curtailments, settlements, and termination benefits.

Vested Benefit Obligation

Economic Theory: __________ are the factor price/factor payment for labor; the price paid per time period for the use of the services of labor. ____________ are the part of the value of production that is due to labor or labor's claim to the value of production. The pricing of labor is dependent upon many complicating factors other than demand and supply. Nonprice considerations (e.g., the worker's feelings about the kind of work done, where and with whom it is done, the conditions under which it is done, and the social status accorded that kind of work), discrimination, labor unions, and government intervention (e.g., minimum _________) influence the level of wages and of employment in many industries. ____________ are both a microeconomicand macroeconomic concept. In microeconomics, the extreme conditions of the labor market correspond to the market structure continuum. One extreme is competitive conditions (there are so many employers that no one firm can influence the wage level (price-taker)) and the other extreme, where there is only one "buyer" of labor, is monopsony (meaning one buyer, the analog of monopoly, which means one seller). Labor is extremely mobile in terms of location, occupation, and specific job. However, since labor requires the physical presence of the owner (the worker), nonprice considerations are often very important in the allocation/location of labor. The need for talent and training can limit the mobility of certain groups of labor (e.g., a clerk cannot easily become a physicist or professional athlete). However, the mobility of the labor force as a whole is much greater than the mobility of individual members (i.e., children of the clerk can choose to become a physicist or athlete). In macroeconomics, wages include taxes withheld, Social Security payments, pension fund contributions, and other nonmonetary benefits (such as employer contributions to Social Security, health contributions, and unemployment insurance) in addition to "take-home" pay. __________ are a factor payment/factor income that is a major component of GNP (approximately 60%) in the income approach to national income accounting. Wage information for tax purposes is shown on a taxpayer's Form W-2, ________ and Tax Statement.

Wages

A ___________ is a statement regarding the quality or quantity of the goods that are the subject of a sales contract. The objective is to protect the consumer. The Uniform Commercial Code (UCC) makes express some ___________ that were implied under common law. A ____________ may be express or implied. UCC 2-312-318 ______________ of title is a warranty provided by the seller that the: title is good, transfer is rightful, and goods are delivered free of any security interest or lien. Express warranty is a warranty that the goods shall conform, which rests on the "bargained for" aspects of the individual agreement and goes so clearly to the essence of the bargain that words of disclaimer are repugnant. It is created by the following (may be oral or written): Any affirmation of fact (of existing conditions) or promise (of future performance of the goods) made by the seller to the buyer that relates to the goods and becomes a basis of the agreement; expressions of value or opinion and "puffing" do not create a __________. Any description of the goods in words, pictures, drawings, or specifications (e.g., in contract, in catalog, on box containing the goods) Any sample or model Implied ___________ is a guarantee that rests so clearly on a common factual situation or set of conditions that it is automatically imposed on the goods by operation of law without any agreement or consent of the parties and can be excluded or modified only by specified procedures. Merchantability is that goods shall be fit for the purpose for which they are sold. It applies only to merchants who deal in the type of goods being sold. To be merchantable, goods must: pass without objection in the trade under the contract description, be of fair average quality as described (applies to fungible goods only), be fit for the ordinary purpose for which such goods are used, be within the variation of an even kind, quality, and quantity within each unit and among all units, be adequately contained, packaged, and labeled as required by the agreement, and conform to the promises or affirmations of fact made on the container or label (if any). Fitness for a particular purpose is imposed on the seller if:the seller has actual or constructive knowledge of the particular purpose for which the buyer needs the goods,the seller must furnish or select the goods, andthe buyer must rely on the seller's skill or judgment to select or furnish the goods.

Warranty

A _________ __________ is an average that takes into account the proportional relevance of each component, instead of treating each component equally. In accounting, some of the uses of a weighted average are in an inventory costing method, in determining the average shares outstanding during a particular period, and to determine the average of accumulated expenditures. Example: The _________ __________ of the following costs for inventory items would be: Unit Purchases Unit Cost Weight Unit Cost x Weight 100 $4.90 1 $ 4.90 200 $5.20 2 10.40 300 $5.50 3 16.50 6 $31.80 = ====== The ________ _________ of the units purchased = $31.80 ÷ 6 = $5.30.

Weighted Average

The _________________________________________________________ is the number of common shares outstanding during the period giving consideration to length of time they were outstanding by relating: the portion of time within a reporting period that a particular number of shares of a certain security has been outstanding to the total time in that period or retroactive period. They are treated as if they had been outstanding for the entire period. It is given to stock splits, stock dividends, and shares of common stock issued in a business combination deemed a pooling of interest (because these shares are considered to be a subset of the originally outstanding shares). Example: If 100 shares of a certain security were outstanding during the first quarter of the fiscal year and 300 shares were outstanding during the balance of the year, the weighted-average number of share outstanding would be: 100 shares x 3 months / 12 months = 25 300 shares x 9 months / 12 months = 225 250 shares

Weighted-Average Number of Common Shares Outstanding

An ____________ _____________ is the unit of accounting for a long-lived asset or assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. FASB ASC Glossary

Asset Group

___________ is the obligation to explain one's actions or to justify what one does. _________________ is one of the primary objectives of financial reporting. It is information about how management discharged its stewardship responsibility to owners or to the citizenry regarding the use of resources entrusted to it. "_________________ requires governments to answer to the citizenry—to justify the raising of public resources and the purposes for which they are used." (GASBCS 1.56) In governmental accounting, financial accountability can include ____________________ of one entity for another, as when a primary government reports for component units for which it is financially accountable because either: the other entity is fiscally dependent on the reporting government or the reporting government either:appointed the voting majority of the governing body orcreated and has the power to unilaterally abolish another entity and that it also either:can impose its will upon orhas a financial benefit or burden relationship with.

Accountability

A basic assumption of accounting is that measurements are made and reports prepared for a specific time period, FASB Concepts Statement 8 indicates that useful financial information reports an entity's resources and claims and their changes for a specific time period. For taxation, an ___________ ______________ is the time a taxpayer uses to determine income, deductions, and tax liability. The _____________ _____________ for a taxpayer is normally a calendar year (ends December 31), a fiscal year (ends the last day of any month except December), or a 52-53 week year (ends on the same day of the week each year).

Accounting Period

___________ ___________ are the specific accounting principles, and the methods of applying those principles, that have been judged by management to be the most appropriate under the circumstances to present fairly the financial position and results of operations and statement of cash flows, in accordance with generally accepted accounting principles, and that, accordingly, have been adopted by the reporting entity for preparing financial statements. A summary of significant accounting policies should be the first disclosure in the notes to the financial statements or may be listed in a separate section preceding the notes to financial statements (FASB ASC 235-10-50). Disclosure should emphasize those principles which are: a selection from existing acceptable alternatives, peculiar to the industry in which the reporting entity operates, or unusual or innovative applications of generally accepted principles. Examples include basis of consolidation, depreciation methods, amortization of intangibles, inventory pricing, accounting for research and development costs, translation of foreign currencies, and recognition of profits on long-term construction-type contracts. Accounting policies should not duplicate details presented elsewhere (e.g., composition of inventories or plant assets). In governmental accounting: A summary of significant accounting policies should be included in the notes to the financial statements, a required component of the comprehensive annual financial report. (GASB 2300.106)

Accounting Policies

An _____________ _____________ is a set of prescribed guidelines for recording and reporting the economic effects (substance) of financial events and transactions. It exists on three levels: basic and pervasive concepts; broad operating standards and practices; and specific conventions, rules, and regulations that define accepted accounting practice at a particular time by incorporation of consensus and substantial authoritative support (and the methods of applying them). Alternate methods of accounting for the same event or transaction may be generally accepted, e.g., inventory cost flows, such as LIFO and FIFO. For example, a principle is, "The cost of assets that benefit more than one period should be charged to expense each period (matched to revenues) in a systematic and rational way (i.e., depreciated); straight-line, double-declining balance, sum-of-years' digits, and machine hours are alternative methods of applying the same principle." However, methods are also considered to be principles.

Accounting Principle

_____________ ________________ is the other-than-temporary removal of a long-lived asset from service. It includes the sale, abandonment, recycling, or disposal in some other manner, but does not encompass the temporary idling of a long-lived asset. After the asset is retired, that asset is no longer under the control of that entity, no longer in existence, or no longer capable of being used in the manner for which the asset was originally acquired, constructed, or developed. (FASB ASC 410-10-20)

Asset Retirement

_________ ____________ is the difference between total revenues and measurable or estimable expenses paid to outsiders to acquire and use all necessary factors of production. ___________ _____________ does not include those implicit costs that are not measurable, such as opportunity costs and return to the owner for use of owner's capital and entrepreneurial skills (the normal profit). It is the profit in excess of actual costs of production. The residual accrues to the owners. Gross revenue from sales XXX Less:Direct materials xx Direct labor xx Factory overhead xx Cost of goods sold XX Equals Gross Profit XXX Less: Nonmanufacturing costs XX Equals _______________ ____________(before income taxes) XX Less: Income tax X Equals _____________ _______________ after tax XX Less: NORMAL PROFIT (imputedreturn to owner forthe use of capital andfor risk-taking) X Equals ECONOMIC PROFITS X === As a general rule, ___________ ______________ is greater than normal profit, and normal profit is greater than economic profit because implicit costs are considered in the determination of normal and economic profits. (Income tax is basically applied to accounting profit that has been adjusted to taxable income per tax rules and regulations.) ___________ ______________ is the basis for the financial statements of individual firms and is often extrapolated to the industry. It is not used when referring to the entire market.

Accounting Profit

_____________ _____________ ____________ (or receivables turnover) is an activity ratio that measures efficiency of credit and collection policies with respect to trade accounts. It confirms the fairness of the receivable balance and reflects the relationship between trade receivables outstanding and credit sales for the period. (Lenient credit policies and poor collection efforts will decrease this ratio.) Computation: Net credit sales ÷ Average AR Average AR used is: (Beginning balance + Ending balance) ÷ 2 Limitations on use of this ratio: It should be computed on credit sales only; if using total sales, a shift in the percentage of credit sales to cash sales will affect the ratio. It can be affected by significant seasonal fluctuations unless the denominator is a weighted average.

Accounts Receivable Turnover

____________ ____________ are amounts the entity is entitled to receive that arise in the normal course of business (e.g., from the credit sales of goods or services). Receivables are claims against others for money, goods, or services, usually on "open" accounts after credit approval is granted. There is no formal written agreement, and they are usually classified as current assets. Normally, accounts receivable are expected to be received within 30 to 90 days. Accounts receivable are contrasted with notes receivable, which are of a longer term (e.g., 3 to 24 months) and accrue interest at a stated rate. Nontrade receivables are those that arise outside of the normal course of business (e.g., loans to employees or receivables from affiliated entities) and may be recorded net or gross. They are reported at net realizable value (i.e., the amount expected to be collected) and are offset by a valuation allowance account (a contra asset account). Factors responsible for a net realizable value less than the amount billed are cash discounts, sales returns, and uncollectible amounts.

Accounts receivable

__________ is the accounting process that recognizes the value of assets or liabilities and related revenues, expenses, gains, and losses, whether received or paid in cash or by credit, barter, or other means (SFAC 6.141). ____________ involves future cash receipts and payments and may involve the use of an estimate as to the value of a transaction. Examples include purchases and sales of goods or services on account, other expenses such as interest, rent, wages and salaries, and taxes that have not yet been paid in cash.

Accrual

____________ ____________ _____________ is a method of accounting that attempts to record the financial effects (substance) of transactions and other events and circumstances in the periods in which they occur rather than only in periods in which cash is received or paid by the entity. ______________ ___________ ____________ recognizes that the earnings process, which consists of buying, selling, producing, distributing, and other operations, often does not coincide with cash receipts and payments. This method of accounting records credit transactions, barter exchanges, nonreciprocal transfers, changes in prices, changes in form of assets or liabilities, and other transactions, events, and circumstances that have eventual cash consequences for the entity but do not involve the concurrent movement of cash. Revenue is recognized when earned and expenses are recognized when incurred, not when cash is received or paid. SFAC 4.50 and 6.139 ______________ ___________ _____________ uses accrual, deferral, and allocation to attempt to reflect the entity's performance during a specific period of time, rather than just the receipts and disbursements of cash—to match the recognition of revenues with the related expenses (and the related increases or decreases in assets or liabilities). _____________ ____________ ____________ makes it possible to recognize expenses and losses at the time that economic benefits are consumed or the loss of future benefits is discovered rather than when payment is made. Accrual accounting uses three expense-recognition principles as appropriate: Associated cause-and-effect Systematic and rational allocation Immediate recognition SFAC 5.85-.86

Accrual Basis Accounting

________________________________is, for the most part, the same as the accrual method required by GAAP. An item is included in gross income for the year in which it is earned. A deduction can be recognized when: all of the events have occurred to create the liability and the amount of the liability can be determined with reasonable accuracy.

Accrual Method of Determining Taxable Income

If an item has been ___________, it has been entered in the accounting records by an adjusting journal entry. ___________ accounting requires that the effect of a future cash transaction be reflected in the current period's financial statements, not in the following period or periods when the cash transaction will occur if its occurrence is certain (contractual) or the result of the passage of time. From the income statement point of view, the adjusting journal entry is recorded because either the revenue is earned (e.g., interest earned but not received) and should be recognized in the current period—even if payment has not yet been received, or the expense (e.g., interest owed but not paid) should be matched against the current period's revenue—even if payment for the expense has not yet been made. From the balance sheet perspective, either an asset (e.g., interest receivable) or a liability (e.g., interest payable) should be reported on the balance sheet, but the item has not yet been recorded.

Accrued

An ________ ____________ _____________ is an obligation associated with the retirement of a tangible, long-lived asset, such as a nuclear power plant. (FASB ASC 410-20-20)

Asset Retirement Obligation

Pension expenses should be treated as part of an employee's compensation and therefore recognized in the period that they are earned. The amount of pension expense that is recognized in a period is based on estimates of the amounts and timing of pension payments and an approved approach for attributing costs to service years. FASB ASC 715-10 provides guidance on the appropriate recognition of the accrued pension expense and associated liability. A liability is recognized when unfunded accrued pension costs exist. This occurs when the projected benefit obligations exceed the fair value of the plan's assets. For example when, during a period, an employer's contribution to the pension plan is less than net pension cost associated with the period.

Accrued Pension Liability

_____________ ___________ ______________ (ABO) is the actuarial present value as of a specific date of benefits attributed by the pension benefit formula to employee service rendered prior to that date and based on service and compensation prior to that date (FASB ASC 715-60-35-3). It is provided annually by the actuary and represents the current obligation as if the pension plan were discontinued as of the measurement date. It will usually be lower than the projected benefit obligation because it does not take into account future compensation levels and is used for only one purpose—to compute an additional minimum pension liability. (Minimum liability so computed is now used for nonpension plans only.) PV PVA Today < --------- Retirement < --------- Benefits ABO Compensation(without increase) Unfunded ABO is the excess of ABO over plan assets.

Accumulated Benefit Obligation

___________ ____________ is the amount of acquisition cost of an operational asset that has been expensed through depreciation. It is a contra asset and maintains the separate recording of the cost expensed through depreciation from the historical acquisition cost.

Accumulated Depreciation

The ____________________________________________ (APBO) is the actuarial present value of benefits attributed to employee service rendered to a particular date. Prior to an employee's full eligibility date, it is the portion of the expected postretirement benefit obligation attributed to that employee's service rendered to that date. On and after the full eligibility date, the accumulated postretirement benefit obligation and the expected postretirement obligation for an employee are the same.

Accumulated Postretirement Benefit Obligation

The ___________ ____________ for operational assets is all expenditures necessary to acquire and prepare an asset for its intended use that are usually used in reference to operational assets. _________ ___________ is subsequently decreased by depreciation. ___________ __________ includes: purchase price, net of any cash discount, and fair value of the asset (cash equivalent) or the fair value (present value) of debt (deferred payment contract) incurred; costs incidental to acquisition, such as legal fees, commissions, and title insurance; and costs of transporting and/or preparing the asset for use (e.g., clearing, surveying, grading, filling of land, removal of an old building, installation and testing of equipment).

Acquisition Cost (Operational Assets)

_________________________________________________________ is an increase (decrease) in the value of the assets of the pension plan. Pension accounting uses both ____________________________________________; it is part of the gain/loss component of the net periodic pension cost. ____________________________________ is the sum of (1) the return on plan investments as provided by the trustee (difference between the fair value of plan assets at the end of the period and that at the beginning of the period, adjusted for contributions and payments of benefits during the period), plus (2) changes in the book value of the plan assets used in operations at the end of the accounting period. This may be positive (gain) or negative (loss). It is a delayed recognition component of the net periodic pension cost. (FASB ASC 715-30-35-18-26 and 715-30-20) _________________________________ is the amount calculated by the trustee as a basis for determining the extent of delayed recognition of the effects of changes in the fair value of plan assets. It is based on the expected long-term rate of return (a projected 5-year average rate) and the market-related value of plan assets. (FASB ASC 715-30-20) Deferred gain/loss on plan assets is the amount of unrecognized gain/loss for the current period on plan assets. It is computed by the employer as the difference between the actual and the expected return on plan assets, and is accounted for by delayed recognition. It is recognized as it is amortized by the employer as part of the unrecognized gains/losses component of net periodic pension cost. (FASB ASC 715-30-35-22)

Actual and Expected Return on Plan Assets

The ______________________________ is the amount by which the recognized pension liability is increased. It is a smoothing procedure to ameliorate the effects of delayed recognition of the three unrecognized pension costs (transition cost, prior service cost, and gain/loss). Its purpose is to increase the recognized pension liability when a pension fund in grossly underfunded. The ________________________________________ requires a separate entry to record a separate liability: the total recognized pension liability must be at least equal to the excess of the ABO over the fair value of pension plan assets (FASB ASC 715); the offset is a debit to a new account, "Intangible Pension Asset," which is now used for nonpension plans only.

Additional Minimum Pension Liability

___________ ________ _______ ____________ (APIC) is an increase in equity (net assets) in excess of par or stated value arising from transactions involving the enterprise's own stock. Usually, it is reported for each class of stock or each type of transaction (e.g., APIC from common, from preferred, from treasury stock (both par and cost methods), from conversion of convertible shares, from retirement of callable or redeemable shares from payment of a liquidating dividend, and from quasi-reorganization). _____________ _________ __________ _____________ is sometimes called "paid-in capital in excess of par" or "contributed capital in excess of par."

Additional Paid in Capital

An ____________ ____________ is a journal entry that is recorded at the end of an accounting period to achieve accrual basis values in all the ledger accounts. Each ____________ ____________ has both an income statement purpose and a balance sheet purpose. The income statement purpose is to properly recognize and match revenue earned with related expenses incurred during the period so that net income is correctly determined. The balance sheet purpose is to properly reflect the values of assets and liabilities at the end of the period. Because the ______________ ______________ has this twofold purpose, every ______________ ______________ affects at least one income statement account and one balance sheet account. Adjusting journal entries can be categorized as prepaid or deferred items, accrued items, or estimated items. For prepaid items (e.g., insurance premiums paid for future coverage or rent paid in advance) or deferred items (e.g., rent received in advance or subscriptions whose issues have not been delivered), the transaction has preceded the recognition of revenue or expense. For accrued items (e.g., wages earned but not paid, interest owed but not paid, interest earned but not received), a transaction will follow the adjustment. Estimated items are either estimating a future expense, such as bad debt expense, or allocating the cost of an asset to expense over time, such as depreciation.

Adjusting Entry

____________ _____________ and expenses are those costs of overall management not considered part of the production cost of goods and services or the selling costs of those goods and services. Administrative expenses include executive salaries and fringe benefits, rent and other general office expenses, and the expense of business support services such as accounting, legal, and data processing. ____________ _______________ are charged to the period (i.e., they are matched against revenue in the period in which they are incurred). The term has a separate meaning in proceedings under the Federal Bankruptcy Code. Section 503 defines administrative expenses as "the actual, necessary costs and expense of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case." The bankruptcy court has the final say as to what is considered an actual and necessary cost.

Administrative Cost

___________ is a consensual fiduciary relationship in which one party (the agent) agrees to act for and under the control of another (the principal). This relationship may be one of employment (master-servant) or of authority (principal-nonservant/agent, e.g., bank manager); independent contractors (e.g., CPAs and lawyers) do not act in an agent capacity (due to lack of control by the principal over the contractor). "Control" relates to control of the physical conduct of the agent and includes the RIGHT or ability to control, as well as actual control or supervision. Types of ___________: Express ____________: created by written contract or oral appointment, e.g., power of attorney; Implied ______________: created by acts or deduced from circumstances showing the intention to create the relationship; _______________ by ratification: approval after the fact of an unauthorized act done by the agent; _____________ by estoppel: created by operation of law; prevents denial of the existence of agency by the principal when a third party relies on circumstances which reasonably lead to the conclusion that an agency exists; Apparent ______________: based on manifestations by the principal to third parties (reliance is not necessary).

Agency

_________ _______ __________ _____________ is the classification of accounts receivable by various age categories. The balance of accounts receivable in each class (e.g., current, 30, 45, 60, 90, and over 90 days past due) is multiplied by the percentage probability of collection based on past collection history and management judgment (e.g., there may be a 90% likelihood that an account 30 days past due will be collected, while the probability drops to 25% when the account is over 90 days past due). This represents a form of expected value—the expected value of the collectible accounts. The allowance is the difference between this estimated collectible amount and the total amount in accounts receivable.

Aging of Accounts Receivable

_________________ is a formula or plan that disperses an amount and is considered an accounting process. It includes, but is broader than amortization. The following are examples of allocation: Assigning manufacturing costs to production departments or cost centers and then to units of product to determine "product cost" Apportioning the cost of a "basket purchase" to individual assets acquired on the basis of relative market values Spreading the cost of an insurance policy or a building to two to more accounting periods

Allocation

Founded in 1887, the _______________________________________________________ (AICPA) represents the CPA profession nationally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups, and other professional organizations. The AICPA: develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the profession's technical and ethical standards. The AICPA's founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status, and a commitment to serving the public interest.

American Institute of Certified Public Accountants (AICPA)

________________ is an accounting process for reducing an asset or liability by periodic payments or writedowns that are distributed across the time the organization gains a value from or has obligation for the item. Specifically, it is the process of reducing a liability recorded as a result of a cash receipt (e.g., unearned revenue) by recognizing revenues or reducing an asset recorded as a result of a cash payment (e.g., prepaid expenses) by recognizing expenses or costs of production. SFAC 6.142 __________________ is an allocation process to orderly reduce bond premium, bond discount, and bond issue costs by allocating the cost of an intangible asset to expense over time.

Amortization

The ___________ ____________ _____________ is the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, write-offs, foreign exchange, and fair value hedge accounting adjustments.

Amortized Cost Basis

___________ ____________ ____________ is revenue derived from sources other than the primary function of a not-for-profit entity, e.g., cafeteria revenue for a hospital, dormitory rents for a college, gift shop sales for the art guild, or book and journal sales for the professional organization. In a not-for-profit hospital, revenue not earned from patient care services is classified as either other operating revenue or non-operating revenue. Other operating revenue is the revenue from patient related activities such as parking fees, cafeteria and gift shop operations, and tuition charges, and also includes donated medical supplies. All revenues that are not earned from provision of patient care services or related activities are classified as nonoperating revenues.

Ancillary Service Revenue

An ____________ is a contract sold by life insurance companies that guarantees a fixed or variable payment to the _____________ (beneficiary of contract) at some future time. A fixed ___________ will be paid out in regular installments (monthly, quarterly, or annually) varying only with the payout method elected. A variable annuity will pay out a variable amount in regular installments. The amount of payout varies with the value of the account. All capital and investment proceeds that remain inside the _______________ accumulate tax-deferred. "______________" is also used generally in present value calculations to refer to a series of equal cash flows over a period of time. Present value of an ____________ tables simplify the process of discounting annuity cash flows.

Annuity

The __________________________________________ is the financial reporting framework adopted by management and, when appropriate, those charged with governance in the preparation of the financial statements, that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.

Applicable Financial Reporting Framework

The ______________________________ is the second of the three stages of the development of software as defined in FASB ASC 350-40-55-3, which identifies three stages in the development of internal-use software: Preliminary project stage __________________________ Postimplementation-operation stage FASB ASC 350-40-30 provides that all costs incurred during the preliminary project stage should be expensed as incurred. During the application development stage, costs associated with developing or obtaining the software should be capitalized, while costs associated with preparing data for use within the new system should be expensed. Costs incurred during the postimplementation-operation stage, typically associated with training and application maintenance, should be expensed.

Application Development Stage

An _____________ _______________ is an expenditure authority or limit created by legislation or ordinance. It includes all reserves, transfers, allocations, supplemental appropriation, and other legally authorized changes. It is prepared for most government funds, especially the general fund, special revenue funds, and debt service funds. (Proprietary and fiduciary funds do not usually have appropriated budgets.) (GASB 1700)

Appropriated Budget

An __________________________ is a transaction with an independent third party who does not have the ability to exert significant influence over the other party. It is not a related-party transaction. An_______________________________ occurs under competitive, free-market conditions. Each party is presumed to act in their own best interest, resulting in a fair market value determination.

Arm's Length Transaction

__________ are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. They describe levels or amounts of resources at a moment in time. SFAC 6.25-.34 and .172-.191 Essential characteristics, all three of which must be present, are as follows: Embodies a probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows A particular entity can obtain the benefit and control others' access to it. The transaction or other event giving rise to the entity's right to or control of the benefit has already occurred. Economic benefits derive from the ability of assets to be exchanged for cash or other goods or services, by being used to produce goods or services to increase the value of other assets, or by being used to settle liabilities. Services provided by other entities cannot be stored and are received and used simultaneously. Rights to receive services for specified or determinable future periods can be assets. Assets are changed by transactions, activities, and events that happen to the entity, both those directly controlled by the entity (receipt and transfer of cash and other assets or adding value to noncash ___________ through operations by using, combining, and transforming goods into other goods) and those beyond its control (changes in prices, interest rates, and technology; impositions of taxes and regulations; discovery; growth or accretion; shrinkage; vandalism; theft; expropriations; and natural disasters). "Valuation accounts" that increase or decrease the carrying value of ____________ are part of the related asset and are not assets, or liabilities, in their own right. These valuation accounts are either adjunct accounts (increase the related asset) or contra accounts (decrease the related asset). In governmental accounting: _____________ are defined as resources with present service capacity that the government presently controls. (GASB Concepts Statement 4.8)

Assets

An ________________ is a transfer by one party (the transferor, obligee, or assignor) to a contract of some or all of the rights under a contract, or of property interest, to another person who is not a party to the contract (the assignee). The assignee can receive no greater rights than those possessed by the assignor. No consideration is required—the transfer may be part of another contract or gratuitous. (Also said of partnership rights; contrast to delegation.) Rights are assignable unless: personal service, credit, or trust is involved. the _______________ would materially vary the duty or risk agreed to by the obligor (the person obligated to perform under the contract). the assignment is prohibited by the contract or by statute. The Uniform Commercial Code (U.C.C.) liberalizes the assignment of rights (especially the right to receive money) under contracts governed by the U.C.C.; however, under U.C.C. 2-210, 9-301, the assignee must file a financing statement ("perfect the assignment") to protect the interest in the assigned rights. Between assignees to the same right, the first to file will prevail. ______________ for the benefit of creditors is a way for the debtor to deal with financial failure other than declaring bankruptcy. The debtor voluntarily transfers specified property to a trustee who pays the creditors. Creditors do not have to consent and ______________ does not legally discharge the debtor from his debt obligations. (Contrast to receivership and bankruptcy.)

Assignment

________________ are estimates of the occurrence of future events affecting pension costs and other postretirement benefit costs (as applicable), such as turnover, retirement age, mortality, withdrawal, disablement, dependency status, per capita claims costs by age, health care cost trend rates, levels of Medicare and other health care providers' reimbursements, changes in compensation and national pension benefits, and discount rates to reflect the time value of money.

Assumptions

Another name for the goal of the audit procedures used to obtain evidence about the dollar amounts and disclosures presented in the financial statements is the audit objective. The primary, overriding _________ _____________ is to express an opinion on the fairness, in all material respects, with which the financial statements present the financial position, results of operations, and cash flows in conformity with an applicable financial reporting framework. Practical or specific audit objectives relate to and are developed in light of the assertions of management embodied in the financial statements. These specific objectives are to obtain and evaluate sufficient appropriate audit evidence regarding the assertions. Example: An audit objective regarding the completeness assertion for inventory would be to obtain reasonable assurance that the inventory quantities include all products, materials, and supplies on hand.

Audit Objective

___________ _____________ are those bodies recognized as authoritative sources of accounting standards. The Council of the American Institute of Certified Public Accountants (AICPA) has issued a resolution that designates the authority for the standards covered by the Compliance with Standards Rule (ET 1.310.001) and Accounting Principles Rule (ET 1.320.001) of the AICPA Code of Professional Conduct. These are included in Appendix A of the Code. The authoritative bodies are as follows: Financial Accounting Standards Board (FASB) Governmental Accounting Standards Board (GASB) Public Company Accounting Oversight Board (PCAOB) International Accounting Standards Board (IASB) AICPA committees and boards:Accounting and Review Services Committee (ARSC)Auditing Standards Board (ASB)Management Consulting Services Executive CommitteeAttestation StandardsTax Executive CommitteeForensics and Valuation Services Executive CommitteePersonal Financial Planning Executive Committee Federal Accounting Standards Advisory Board (FASAB) (Note that the Internal Revenue Service (IRS) and Securities and Exchange Commission (SEC) are not included as authoritative bodies.) Appendix A of the Internal Revenue Code (IRC) contains a resolution designating the FASB as the body to establish accounting principles. The resolution also refers to Accounting Research Bulletins (ARBs) and Opinions of the Accounting Principles Board that were issued prior to the creation of the FASB. These shall also be considered generally accepted accounting principles until they have been superseded. Furthermore, Appendix A contains a resolution designating the GASB as the body to establish accounting principles for state and local governmental entities and the three committees of AICPA as the bodies to establish attestation (audit) standards. The Compliance with Standards Rule and Accounting Principles Rule, which refer to the standards promulgated by authoritative bodies, read as follows: Compliance with Standards Rule (ET 1.310.001) Quote A member who performs auditing, review, compilation, management consulting, tax, or other professional services shall comply with standards promulgated by bodies designated by Council. Accounting Principles Rule (ET 1.320.001) Quote A member shall not (1) express an opinion or state affirmatively that financial statements or other financial data of any entity are presented in conformity with generally accepted accounting principles or (2) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from an accounting principle promulgated by the bodies designated by Council to establish such principles that has a material effect on the statements or data taken as a whole. If, however, the statements or data contain such a departure and the member can demonstrate that due to unusual circumstances the financial statements or data would otherwise have been misleading, the member can comply with the rule by describing the departure, its approximate effects, if practicable, and the reasons why compliance with the principle would result in a misleading statement.

Authoritative Bodies

_______________ is a criterion of revenue recognition for the governmental funds of governmental units. Revenues are "_____________" when they are collectible within or soon enough after the current period so that they can be used for the payment of obligations incurred during the same period. Many jurisdictions consider revenues collected within 60 days of the end of the current period to be available. The length of time for availability should be disclosed in the financial statements in the summary of significant accounting policies.

Available

____________ ______ ____________ (AFS) debt securities are investments not classified as either trading securities or as held-to-maturity securities.

Available for Sale

A _____ ______ is a receivable that is considered to be uncollectible. The loss in the valuation of receivables should be recognized for financial accounting purposes when the original revenue is earned even if the specific uncollectible receivables cannot be identified. For tax purposes, the loss in valuation of receivables should be recognized when the specific receivable becomes worthless. For tax purposes, ________ ________ that a taxpayer incurs, and that did not arise in the course of operating a trade or business by the taxpayer, are nonbusiness _____ ________. To be deductible, nonbusiness _______ ________ must be totally worthless. A partly worthless nonbusiness _____ _______ cannot be deducted. Nonbusiness ________ _________ are treated as short-term capital losses. (IRC Section 166) Business _______ ________ that become wholly worthless during the tax year are deductible. Business bad debts that are partially worthless may be partially deductible according to IRC Section 166.

Bad Debts

Also called a statement of financial position, a balance sheet is a summary of assets, liabilities, and owner's equity for a company as of a specific date. It is considered to be a snapshot of the organization's financial position at a point in time.

Balance Sheet

________ is the condition of being judged insolvent by the court and having property distributed to creditors when a debtor is unable to meet debts. The uniform ___________ provisions are governed by the ___________ Reform Act of 2005. The purpose of the Act is to provide relief to an insolvent debtor from his or her debts (to provide a "fresh start") and to give all creditors an equal chance to share in the assets of the debtor in a specified priority and according to their claims. A person can become __________ involuntarily or voluntarily. He or she can also undertake a reorganization or liquidation to pay his or her debts. Chapter 7 of the ___________ Act concerns liquidation of the business or the assets of the individual. An interim trustee is appointed by the court with broad powers to make management changes, obtain financing, and operate the business. Chapter 11 concerns corporate reorganization, but may be used by individuals. Unless the court rules differently, the officers of the corporation continue to operate the business and propose plans to pay off the debts. However, the court must approve such plans. ___________ proceedings involve many parties: the debtor, the bankruptcy court judge, the trustee, secured creditors, general creditors, the creditors committee, and supporting professionals (e.g., accountants and attorneys).

Bankruptcy

The ____________ __________ __________is a set of uniform laws that regulate the critical aspects of bankruptcy. It was originally passed in 1878 and amended in 1984, 1994, 2000, and 2005. The act intended to provide relief to an insolvent debtor from his debts (to provide a "fresh start") and to give all creditors an equal chance to share in the assets of the debtor in a specified priority and according to their claims. It also incorporates secured financing per the Uniform Commercial Code (U.C.C.) and other debtor-creditor relationships. Contrast to liquidation and reorganization. The operative sections of the Act are as follows: Chapter 7—Liquidation Chapter 9—Adjustment of the Debt of a Municipality Chapter 11—Business Reorganization Chapter 12—Adjustment of Debts of Family Farming and Family Fishermen Chapter 13—Adjustment of Debts of an Individual with Regular Income (The CPA Examination is concerned primarily with liquidation.) May be voluntary or involuntary.

Bankruptcy Reform Act

________ is the amount used by the taxpayer to compute the amount of depreciation, amortization, depletion, casualty losses, and the gain or loss upon sale, exchange, or other disposition of an asset. In most cases, the _______ is the carrying value (acquisition cost plus additions or improvements minus accumulated depreciation). In most cases, the initial _________ of property is the acquisition cost (i.e., fair market value); however, in some cases a new owner substitutes (assumes) the _______ of the asset in the hands of the previous owner (usually lower than fair market value), as with a gift or tax-deferred transaction. The _________ of property is also adjusted by certain events. (See ________ adjustment.)

Basis

A __________ ___________ is a change in the valuation of the basis of an asset used for determining the asset's gain or loss for tax purposes or used for determining the amount of allowable depreciation, depletion, amortization, or casualty losses. In general, the ________ of any property is increased by all items properly added to a capital account (e.g., the cost of any improvements having a useful life of more than 1 year as well as any rehabilitation expenses). The basis of the property, on the other hand, is reduced by items such as: Section 179 deduction, deduction for clean-fuel vehicles and refueling property, nontaxable corporate distributions, deductions previously allowed (or allowable) for amortization, depreciation, and depletion, exclusion of subsidies for energy conservation measures, credit for qualified electric vehicles, tax-deferred transactions (e.g., Section 1031 transactions), investment credit (part or all) taken, casualty and theft losses and insurance reimbursements, certain canceled debt excluded from income, rebates from a manufacturer or seller, and easements.

Basis Adjustment

_______ is discussed in the definition of neutrality (SFAC 8.3, QC14). It is the tendency of a measure to fall more to one side than the other of what it represents, instead of being equally likely to fall on either side. A neutral depiction is without _________ in the selection or presentation of financial information.

Bias

A ________ is a periodic interim invoicing for progress payments on long-term contracts. It is a contra asset (construction in process) account, netted against the construction in process asset account and recorded as either an asset (construction costs in excess of _________) or as a liability (_________ in excess of construction costs).

Billings

A ________ is a type of debt instrument or debt security in the name of the issuing party (a government or corporation) usually issued in denominations of $1,000. It is a legal document representing a long-term obligation to pay interest at a specified rate at specified intervals and to repay a specified amount (the principal) on a specified future date (at maturity). A bond represents a liability or debt to the issuer and is senior to (paid before) capital stock. A bond carries less risk than capital stock. The holder is the creditor, and the maker or issuer is the borrower or debtor. A _________ is usually negotiable and can be sold or transferred, with the transferee becoming the holder in due course. ______ are classified in the following ways: Character of the issuer: Federal, municipal (the interest received from which is tax-exempt), or corporate (industrial) Character of the security: Secured, unsecured (debenture), or guaranty Payment of interest: Ordinary, income, participating, registered, bearer, or coupon Maturity of principal: Ordinary, callable, redeemable, convertible, or serial In the United States, new corporate bond issues must be registered for tax reporting purposes, so bearer or coupon _________ are no longer issued by U.S. corporations.

Bonds

_________ __________ _________ ___________ is the book value of the corporation (available to common, i.e., total stockholders' equity less preferred equity and dividends in arrears) divided by the number of shares of common stock outstanding (i.e., treasury shares are not included).

Book Value per Share

___________ is a monetary consideration, usually cash, received or given (in a small amount) in a nonmonetary exchange. ___________ often causes a gain which must be recognized.

Boot

A ________________ is a plan of action expressed in dollars. It is a formal quantitative expression of the plans of the enterprise—a plan for the coordination of revenues and expenditures or the amount of money that is available for, required for, or assigned to a particular purpose. A __________ is a method of providing control and evaluating performance. It is an expression of policy and financial intent of a governmental entity. In governmental funds, the ____________ is formally integrated in the records using memorandum accounts called "________________ accounts." GASB 1700 __________________ are also used as an internal planning tool in private not-for-profit and for-profit organizations, and are usually thought to be an expression of the organization's strategic plan in monetary terms. Such ________________ are not integrated into the formal accounting records as is done in the governmental sector. A complete ________________ is called the master ______________. A master ____________________ is composed of smaller _________________, including: operating ____________ (______________ income statement), sales ______________ (sales forecast), production _______________, direct materials ______________, direct labor _______________, direct overhead __________________, cost of goods sold ________________, selling and administrative expense _____________, financial ________________, cash forecast (cash receipts and disbursements), ______________ balance sheet, special _______________, performance _______________, capital ________________, pro forma financial statements, pro forma statement of activities, pro forma statement of financial position, and pro forma statement of cash flows.

Budget

As a control technique, governments use budgetary accounts to record the officially adopted budgetary estimates of revenues, expenditures (appropriations), and other changes in fund balance (or fund equity) directly in the ledgers of governmental funds. Thus, these accounts formally incorporate the budget into the fund accounting records. Accounts used are Estimated Revenues and Appropriations (or Estimated Expenditures), and Budgetary Fund Balance. ______________ _______________ procedures do not directly affect revenue and expense measurement. At the end of the budgetary period, budgetary accounts are reversed and thus completely removed from the books in the closing process.

Budgetary Accounts

A _____________ consists of inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. Although _____________ usually have outputs, outputs are not required for an integrated set to qualify as a _______________. The three elements of a _______________ are defined as follows: Input: Any economic resource that creates, or has the ability to contribute to the creation of, outputs when one or more processes are applied to it. Process: Any system, standard, protocol, convention, or rule that, when applied to an input or inputs, creates or has the ability to contribute to the creation of outputs. Output: The result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues.

Business

A ______________ _______________ occurs when an entity acquires net assets that constitute a business or acquires equity interests of one or more other entities and obtains control over that entity or entities. Transactions sometimes referred to as true mergers or mergers of equals are also ______________ ______________.

Business Combination

The following terms and descriptions of _____________ ______________ are taken from FASB ASC 280-10-50: Operating segment. This is a component of a public entity (FASB ASC 280-10-50-1): that engages in business activities where it earns revenues and incurs expenses, whose operating results are regularly reviewed by chief operating decision makers, and for which discrete financial information is available. Reportable segment. Operating segments that meet one of the following quantitative tests are reportable segments (FASB ASC 280-10-50-12): Segment revenue (both to external customers and intersegmental) is at least 10% of total revenue of all operating segments. The absolute amount of segment profit (or loss) is at least 10% of all operating segments with a profit (or loss). Operating segment assets are at least 10% of total assets. Reportable segments must report their revenue, profit (or loss), assets, and other related items. (FASB ASC 280-10-50-22) Enterprises must report the extent of reliance on major customers—those who comprise at least 10% of sales. (FASB ASC 180-10-50-42)

Business Segment

____________-_____________ ____________ are services provided by a governmental unit that are fee-supported and provided in ways similar to business enterprises. Examples are public utilities (water, sewer, gas, electric), parking garages, and golf courses. Government business-type activities can be contrasted with general government activities or government-type services, which are provided to everyone at little or no charge (e.g., police and fire protection, education and health services). Any charges, such as copying fees collected by police departments for accident reports, are incidental and are not expected to support the activity's full cost.

Business-Type Activities

To make something _________ means there is a provision that at the issuer's option the preferred stock or bond can be called in for cancellation or payment at a specified price (usually greater than the original issue price) during a specified time period (prior to bond maturity). Called shares are not considered treasury shares. Also, liabilities can be callable at the option of the creditor (i.e., the creditor has the right to demand repayment of a liability at a given date).

Callable

________ is a factor of production, one of the three essential elements of obtaining or producing wealth. ________ is man-made "investment" goods, e.g., tools, machinery, equipment, buildings, and storage, transportation, and distribution facilities. It is considered to be held (owned) primarily by households. _________ is a microeconomic concept. Note: The economic resource known as capital or real capital refers only to man-made productive assets; money is not included in this definition. To an economist, money is financial _________ or money capital. _________ is the interest of owner(s) in the net assets (total assets minus total liabilities) of an entity. It is the measure of the resources provided to an entity that are considered permanent in nature—long-term debt and owner's equity. In an economic sense, __________ also means assets that provide productive capacity—a factor of production.

Capital

_______ _________ are properties specified in the tax law that give rise to capital gain or loss. All property is considered a _________ ________, except the following: Property held for resale (inventory) Real or depreciable property used in a trade or business (e.g., operational or fixed assets) (see IRC Sections 1231, 1245, and 1250) Accounts or notes receivable acquired in the normal course of business Copyrights; literary, artistic, or musical compositions; letters or memoranda; or similar property other than patents or inventions in the hands of the creator, anyone who assumes the creator's basis (e.g., the property was received as a gift), or in the case of letters and memoranda or similar property, a person for whom the property was prepared or produced U.S. government publications received from the government at a reduced price Commodities derivative financial instruments held by commodities derivatives dealers Hedging transactions enacted by a taxpayer in his or her normal course of business Supplies used or consumed regularly by a taxpayer in his or her ordinary course of business Taxpayers have the option to elect to treat as a _________ _________ the sale or exchange of a musical composition or a copyright in a musical work that was created by the taxpayer or that has a basis determined by the reference to the creator's basis. Other detailed rules for determining assets that are not capital are stated in IRC Section 1221. In governmental accounting, the term "capital asset" is used for land, land improvements, buildings, vehicles, machinery, equipment, and other property and plant assets in a governmental environment. (GASB 1400.103)

Capital Asset

The term "capital assets" is used in governmental accounting for long-lived assets (generally longer than one year) rather than the terms "property, plant and equipment," or "fixed assets." Capital assets are not reported in governmental funds, but they are reported in proprietary and fiduciary funds as well as in the government-wide or entity-wide financial statements. GASB 1400

Capital Assets (Governmental)

__________ _________________ are cash or other asset contributions made by individual partners to the partnership.

Capital Contributions

____________ ________ are expenditures for major renewals and betterments of operational assets. They are capitalized and depreciated over the remaining useful life of the asset, which is in contrast to revenue expenditures.

Capital Expenditures

A ________ __________ ______ is a fund used to account for financial resources to be used for the acquisition or construction of major capital facilities or long-lived assets (other than those financed by proprietary or trust funds). It is accounted for on the modified accrual basis and has a limited life which encompasses the construction or acquisition period and is terminated at the end of that period, with any remaining assets being transferred to a related debt service fund or to the general fund upon termination. GASB 1300.106 Budgetary accounts are generally not used; however, encumbrance accounting is used to prevent overspending. Resources are recorded when: received or accrued (e.g., from transfer from the general fund or a special revenue fund, proceeds from obligation bond issuance or grant), and expended for authorized project expenditures. Only cash, receivables, and short-term payables are shown on the capital projects fund balance sheet. Liabilities for project-related bond issues or other long-term debt and construction-in-progress are shown in the government-wide statement of net position.

Capital Projects Fund

________ _________ is an ownership interest in an incorporated business enterprise, represented by stock certificates that may be bought and sold or otherwise transferred. It conveys the right to influence management via participation in and voting at stockholders' meetings, to participate in earnings through dividends, and to share in the distribution of net assets upon liquidation. There may be different classes of stock with different rights in the same corporation. Capital is specified in state law and the entity's articles of incorporation. ________ _________ is that portion of contributed capital equal to the par, or stated, value of stock outstanding. The issue price of stock is allocated between the par value and the price in excess of par (e.g., $5 par common stock is issued for $20—$5, the par value, is recorded as capital stock and $15 is recorded as contributed capital in excess of par (CCEP, common)). Each class of common stock is recorded separately. Treasury stock is recorded as a contra, or negative, element of _________ ___________ under the par value method (with the excess price paid over par to reacquire the stock recorded as CCEP, treasury stock).

Capital Stock

_________ is the process of recording a cost as an asset and deferring its recognition as an expense to future periods. The asset can be either tangible (e.g., inventory or fixed assets), intangible (e.g., securities, organization, or rearrangement costs), or represent the right to receive services in the future (e.g., a prepaid expense, such as prepaid rent, insurance, subscriptions, or any service paid for in advance of receipt of the service). Assets are subject to an assessment of recoverability by the enterprise, such as the benefits to be derived and the periods benefited. Accounting issues involve determination of the following: The valuation of the asset, which usually equals the cash outlay at the market price of the asset acquired, plus costs to put the asset into productive use The periods that will be benefited by the asset The appropriate method of amortization of the deferred cost

Capitilization

_______ ____ ________ is to record the cost of interest (as well as other time-related costs, such as taxes and insurance) paid to finance a long-term construction project (whether self-constructed or acquired from others and whether for self-use or for resale) as an asset and defer its recognition as an expense to future periods. It is not to exceed the total interest incurred during that period. FASB ASC 835-20 Conceptually, the amount of interest to be capitalized is the interest that could have been avoided if the expenditures for the asset had not been made. It requires determination of average accumulated expenditures during each interim capitalization period and the capitalization rate (usually the purchaser's incremental borrowing rate or a weighted-average interest rate).

Capitilization of Interest

____________ are deductions or credits that cannot be utilized on the tax return during a year that may be carried back to reduce taxable income or taxes payable in a prior year.

Carryback

_____________ are deductions or credits that cannot be utilized on the tax return during a year that may be carried forward to reduce taxable income or taxes payable in a future year. An operating loss _____________ is an excess of tax deductions over gross income in a year; a tax credit _________________ is the amount by which tax credits available for utilization exceed statutory limitations.

Carryforward

The ____________ ___________ or book value is the net amount at which an item is reported in the financial statements of the enterprise. For a receivable, the FASB ASC Glossary indicates the carrying amount is the "face amount increased or decreased by applicable accrued interest and applicable unamortized premium, discount, finance charges, or issues costs and also an allowance for uncollectible amounts and other valuation accounts." For a payable, the FASB ASC Glossary indicates the carrying amount is the "face amount increased or decreased by applicable accrued interest and applicable unamortized premium, discount, finance charges, or issue costs."

Carrying Amount

Under the __________ ____________ —or cash receipts method—property or services received are included in gross income when actually or constructively received. Cash or checks received are considered gross income. Accounts receivable are not included in gross income. The value of any other property that is received, including a note receivable, is included in gross income. Income that is constructively received is included in gross income. An example is interest income credited to an account by a financial institution. Income is constructively received if: it is readily available to the taxpayer and actual receipt is not subject to substantial limitations or restrictions.

Cash Basis

A _________ ____________ is offered on credit sales to encourage early payment by the customer, usually stated "2/10, net/30"—2% discount if paid within 10 days, otherwise the gross amount is due in 30 days. Cash discounts are considered financing income or expense under the net method (discount not taken). This results in a very high effective annual interest rate: 2% for 20 days (30-10) equals over 36% per year, computed as follows: Annual Discount rate interest = -------------- x (360 days / discount period) rate (1 - Discount).02= --------- x (360 / (30-10))(1 - .02)= (.02 / .98) x (360 / 20)= .367= 36.7%

Cash Discount

_________ ___________ are short-term, highly liquid investments that have both of the following characteristics: they are readily convertible to known amounts of cash AND are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month U.S. Treasury bill and a three-year U.S. Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a __________ ___________ when its remaining maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations).

Cash Equivalent

_________ __________ is the amount of net cash that was generated by an entity during an accounting period. It is the difference between total cash inflows and total cash outflows.

Cash Flow

A _________ __________ _________ is a hedge of the exposure to variability of cash flows of a recognized asset or liability, or of forecasted transactions, that is attributable to a particular risk.

Cash Flow Hedge

Under the cash basis of accounting, expenses are deductible only when actually paid with cash or other property. There is no current deduction for capital expenditures. The expense for capital expenditures will be recognized in the form of depreciation, amortization, or depletion.

Cash Method of Determining Taxable Income