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1 - Framework
CPA - FAR 1 - Conceptual Framework, Standard Setting, & Financial Reporting
| Question | Answer |
|---|---|
| What are the 2 qualitative characteristics? | Relevance and faithful representation |
| What are the 3 elements of relevance? | Predictive value, confirmatory value, & materiality |
| What are the 3 elements of faithful representation? | Completeness, neutrality, & free from error |
| What are the 4 enhancing qualitative characteristics? | Comparability, Verifiability, Timeliness, & Understandability. |
| 4 GAAP Assumptions: | economic entity, going concern, periodicity, & monetary unit |
| SEC's 3 steps to rule-making process: | Concept Release, Rule Proposal, & Rule Adoption |
| SEC was created under: | The 1934 Securities Exchange Act |
| What does articulation mean? | Refers to the interrelationship of the elements of the financial statements |
| Comprehensive income definition: | Change in equity from transactions from nonowner sources |
| When is revenue recognized (principle)? | When revenue is earned, realized, & collectible |
| What is the matching principle? | Revenues should be matched with the expenses in the same period necessary to generate them |
| What is the single source of authoritative GAAP recognized by the FASB? | Accounting Standards Codification (ASC) (nongovernmental entities) |
| GAAP operates under what basis? | Rules based |
| IFRS operates under what basis? | Principles based |
| What are the 2 formats of the Income Statement (GAAP)? | Single-Step format (revenue - expenses) & Multiple-Step format (operating, then non-operating section) (preferred but not required) |
| What are the 2 approaches to reporting comprehensive income? | 1 statement (combined) approach & 2 statement (separate) approach |
| What are the 5 items of comprehensive income? | 1) foreign currency translation gains/losses, 2) under/overfunded pension calculation, 3) cash flow hedging derivative gains/losses, 4) available-for-sale debt securities unrealized holding gains/losses, & 5) instrument-specific credit risk change (fair) |
| What are the 3 steps in the main elimination entry for consolidations? | 1) Write sub’s net assets to fair value, 2) Eliminate capital structure of sub (stock, etc.), & 3) Record goodwill & non-controlling interest |
| AFV will SPICE up your GOODNIght meaning: | A) Assets to Fair Value, b) eliminate Stock, Paid In Capital, retained Earnings, c) record Goodwill & Noncontrolling Interest |
| What are the 4 steps of the elimination checklist (consolidations)? | 1) complete Main Elimination Entry, 2) eliminate intercompany Sales, 3) eliminate intercompany Sale of Fixed Assets, & 4) eliminate intercompany Bonds |
| What are the 3 steps to eliminating intercompany sales (consolidations)? | Eliminate intercompany 1) Sales & Purchases, 2) A/P & A/R, and 3) Profit in Inventory |
| International Accounting Standards Board (IASB) issues: | International Financial Reporting Standards (IFRS) |
| How does IFRS differ from GAAP in which financial statements are required? | IFRS requires Statement of Comprehensive Income, Statement of Changes in Equity, & comparative financial statements (must report a prior full year) |
| Under IFRS, financial assets are reported using what 3 methods? | Amortized Cost, Fair Value through OCI, or Fair Value through Profit/Loss |
| True/False: (IFRS) Deferred tax assets & liabilities are classified as noncurrent on the Statement of Financial Position (BS). | True |
| (IFRS) What are the 2 fixed asset & intangible asset valuation options and requirements? | Cost Model (cost - acc. depreciation + impairment loss) or Revaluation Model (asset adj. to fair value - acc. Depreciation: increases included in OCI, decreases are expensed) |
| (IFRS) How are finite & indefinite life intangible assets amortized? | Finite life: amortized over useful life / Indefinite life: not amortized |
| (IFRS) In the Statement of Cash Flows, interest expense or finance cost should be categorized as either: | Operating or financing section (once classification is chosen, all future costs must be similarly classified) |
| True/False: When the indirect method is used to present the statement of cash flows, interest & income taxes must be disclosed in the supplemental notes. | True |
| When using the direct method to present the statement of cash flows, how do you calculate cash collected from customers? | Net sales [ + decrease in A/R] OR [ - increase in A/R] |
| When using the direct method to present the statement of cash flows, how do you calculate cash paid to suppliers? | COGS [ + increase in A/R] or [ - decrease in A/R] AND [ - increase in A/P] or [ + decrease in A/P] |
| When using the direct method to present the statement of cash flows, how do you calculate cash paid for operating expenses? | Operating Expenses [ + increase in prepaid expenses] or [ - decrease in prepaid expenses] AND [ + decrease in payable] or [ - increase in payable] |
| What is included in the statement of cash flows from investing activities (HAPPEE)? | Held to Maturity, Available for sale, Property, Plant, Equipment, & Equity Securities |
| What is included in the statement of cash flows from financing activities (PRINC DIV I TS) | debit Principal, Dividends, Issuing Stock, Treasury Stock |
| What is an accrual? | Earned revenue or incurred expense but no cash receipt/outlay (rev ex: selling an item on credit) (exp ex: rent exp paid in Jan for Dec) |
| What is a deferral? | Cash receipt/outlay but no earned revenue or incurred expense (rev ex: customer prepays for repair - liability ) (exp ex: customer prepays insurance - asset) |
Created by:
katieaymin
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