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1 - Framework

CPA - FAR 1 - Conceptual Framework, Standard Setting, & Financial Reporting

QuestionAnswer
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