FAR - Chapters 1-3
What is the acronym for the 3 characteristics of reliable financial information?
CNF (Complete, neutral, free from error)
What is the phrase we use to recall the 4 enhancing characteristics of financial info?
Compare and verify in time to understand
What are the 3 characteristic of faithful/reliable financial information?
Complete, neutral, and free from error
What is the acronym for the 4 constraints on notes to the financial statements?
FACR (future events, adverse consequences, cost, relevance)
What are the two sets of characteristics of financial information?
Fundamental characteristics, enhancing characteristics
what are the 4 constraints on the notes to the financial statements?
Future oriented disclosures and information, adverse consequences, cost constraint, relevance
What is the formula for Net realizable value?
NRV = Sales Price - costs to sell
What is the one required financial statement that is easiest to forget?
Notes!
What is the acronym for the characteristics of relevant financial information?
PCM (Predictive, Confirmatory, Materiality)
What characteristics make financial information relevant?
Predictive Value or confirmatory value, and must be material (PCM)
What are the two fundamental characteristics of USEFUL financial information?
Relevant, Faithful (reliable)
what are the 4 items on the income statement?
Revenue, expenses, gains, losses (REGL)
Who ultimately sets GAAP?
SEC
Who determines GAAP rules in practice?
The financial ACCT standards Board (FASB)
How does FASB set GAAP?
Through the issuance of ASC (ACCT Standards Codifications)
What is the balance sheet formula?
assets - liabilities = owners equity
What are the 6 required items for general purpose financial statements?
balance sheet, income statement, statement of cash flows, OCI, statement of stockholder's equity, NOTES!
What are the 4 enhancing characteristics of financial information?
comparability, verifiability, timeliness, understandability
what is the JE to record depreciation?
debit depr. expense credit accumulated depreciation
what are the 2 ways to account for costs?
expense, capitalize
what does it mean for financial info to be relevant?
has the ability to affect the decision of a primary user of the financial statements
what does it mean for financial info to be faithful/reliable?
means that info is fair and accurate
what does the income statement report?
performance over a period of time
what does it mean to expense something?
recognize an expense immediately on the income statement
What does it mean to capitalize a cost?
record cost as an asset on the balance sheet, and reduce the asset/recognize expenses over time
how do we discount something back to present value?
take the future value and apply the appropriate discount rate to bring the amount back to the present
what is the cost constraint of notes to the financial statements?
the benefit of disclosure and reporting of financial statement notes must outweigh the costs
How does FASB update GAAP?
through the issuance of ASUs (ACCT Standards Updates)
why do we capitalize assets and record depreciation over time?
to match revenue and expenses!
What is the objective of Financial Reporting (per SFACs)?
to provide financial information about the reporting entity to the primary users of the financial statements that is useful in decision making
what does it mean to recognize something in the financial statements?
to record or journalize the event
what is the purpose of notes to the financial statements?
to supplement or further explain information presented on the face of the financial statements
What is the primary purpose of notes to the financial statements?
to supplement or further explain the information on the face of the financial statements
When does a gain result?
when sales price or NRV is greater than the book value
When does a loss result on a sale?
when sales price or NRV is less than the book value