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ACFM 322 Final
| Term | Definition |
|---|---|
| Determine the fair value of the compensation Expense the compensation in the time period(s) in which employees provide service | What are the accounting objectives of share-based compensation? |
| Substantially all employees can participate Length of time for a purchase decision does no exceed 1 month from price fix Discount is not greater than 5% | If the following conditions are met, new shares purchased by employees are NOT compensation: |
| Compensation Expense | If the above criteria is not met, any discount is recorded as ____________________________________ |
| Restricted Stock Plans | Compensation is market price at grant date of unrestricted share of same stock (unless cash will be given) |
| Restricted Stock Unit | Right to receive specified # of shares of company stock; shares are distributed as recipient satisfies vesting requirement; subject to forfeiture as well; no voting rights; no right to receive dividends; if elect cash equivalent it is a liability |
| Stock Option Plans | When employees are given the right to buy shares at a specified price, within a specified # of years from grant date Compensation is fair value of stock options at grant date |
| Intrinsic Value | Difference between the market price of shares and the option price |
| Estimate percent at beginning Record when forfeitures occur | If there is a material expected forfeiture rate, there are 2 ways to record the adjustment: |
| Market Price | When options are exercised, the _______________________ on the exercise date is irrelevant |
| Tax Effects | Stock-based compensation plans are either "incentive stock option plans" or "nonqualified plans" |
| Incentive | Under _______________ plans, the recipient pays no income tax until any acquired shares are subsequently sold; the employer gets no tax deduction upon exercise of the options |
| Nonqualified | Under _______________ plans, the employee pays income tax without delay, but the employer can deduct the difference between the exercise price and market price at exercise date resulting in a DTA. |
| Graded Vesting Plans | Stock option plans that gradually vest |
| Cliff Vesting | Vest at all once |
| Compensation Expense | Companies can account for these in the same way as those that vest on one single date, or they can choose to use a more complex method that often results in lower _____________________________ |
| Tranche | Each vesting group, or _____________, is viewed as a separate award |
| Basic EPS | Earnings available to common shareholders divided by the weighted-average number common shares outstanding; reflects only shares currently outstanding (with no dilution) |
| Simple Capital Structure | When a firm has no outstanding securities that could dilute EPS |
| Potential Common Shares | Securities that may become stock through their exercise, conversion, or issuance and therefore dilute EPS: ____________________________________________ |
| Stock Options, Stock Warrants, Convertible Bonds | Examples of potential common shares |
| Retroactively | Stock splits and dividends will change the number of shares outstanding ________________________ |
| Reduced | If shares were reacquired during the period, the weighted-average number of shares is __________________ |
| Net Income - Preferred Dividends | Calculation for the earnings available to common shareholders |
| Complex Capital Structure | A firm has this if potential common shares are outstanding; requires 2 EPS |
| Basic EPS & Diluted EPS | What are the 2 EPS? |
| Diluted EPS | Incorporates the dilutive effect of all potential common shares |
| Retrospective Modified Retrospective Prospective | What are the 3 approaches to reporting accounting changes? |
| Retrospective Approach | Revise prior years' statements |
| Modified Retrospective Approach | Apply the change in the current period with adjustment to the beginning RE |
| Change in accounting principle Change in accounting estimate Change in reporting entity | What are the 3 types of accounting change? |
| Change in Accounting Principle | Change from one generally accepted principle to another |
| Retrospectively | Most of the changes for changes in accounting principle are accounted for ____________________ |
| Restated | All years shown in comparative statements must be ______________ |
| Taxes | A change in inventory costing requires a related adjustment for _____________ |
| Justified | A change must be ____________ as more appropriate than the previous method |
| Disclosure Notes | ____________________________ should include why the change was made and its effect on financials |
| Lack of info restricts revision of prior statements It is impracticable to determine some prior-period effects OR the cumulative effect of prior years A new accounting standards update specifically requires prospective accounting | Apply the change in the earliest year possible or even prospectively if: (Hint there are 3) |
| Change in Accounting Estimate | Revision of an estimate based on new information or experience |
| Prospectively | The changes for changes in accounting estimate are accounted for ____________________ |
| Estimate & Principle | Change in depreciation method is a change in accounting _____________ achieved by a change in accounting __________________ |
| Estimate | If uncertain whether it is a change in principle or change in estimate, treat as change in ______________ |
| Change in Reporting Entity | Change from reporting as one type of entity to another type |
| Presenting consolidated financial statements in place of statements of individual companies Changing specific companies that constitute the group for which consolidated or combined statements are prepared | This type of change occurs as a result of: (Hint there are 2) |
| Retrospectively & Prospectively | The changes for changes in reporting entity are accounted for ____________________ or ____________________ |
| Restated (Retrospective) | If changes in accounting rules result in a change in reporting entity, any prior-period financials presented for comparative purposes must be ____________ to appear as if the new entity existed then |
| NOT Restated (Prospective) | When one company acquires another, financial statements are merged as of the date of acquisition and the acquirer's prior-period financial statements presented for comparison are __________________________ |
| Same Period | An error made & discovered in the _______________________ is corrected in that period with a reversal + appropriate entry |
| Prospectively | All other errors are accounting for _______________________ |
| Prior Period Adjustment | If RE is incorrect, the correction is reported as a __________________________________ to the beginning balance in the statement of shareholders' equity |
| Disclosure Note | A _________________________ is needed to describe the nature of the error & the impact of its correction on operations |
| Self-Corrected | An error that is discovered after it has _________________ does not require a correcting entry |
| Journal entry to correct the error Related financials are restated to reflect the proper information | An error that affects previous financials but not Net Income or even if it does affect Net Income it includes: (Hint 2 things) |
| Amendments | If Income Taxes are affected, __________________ must be filed and an adjustment is made for additional tax payments or refunds |
| Operating Investing Financing | What are the 3 categories of the cash flow statement? |
| Operating Activities | Involves transactions from primary operations of business (these that are related to components of NI) |
| Investing Activities | Involves purchasing and sale of long-term assets |
| Financing Activities | Involves funding from external sources (investors & creditors) |
| 1. Cash Flows from Operating Activities (Direct/Indirect) 2. Cash Flows from Investing Activities 3. Cash Flows from Financing Activities 4. Reconciliation to Cash on Balance Sheet 5. Noncash Investing & Financing Activities (disclosure note) | Steps to making a statement of cash flows: |
| Financing & Increase | Borrow money from bank |
| Operating & Decrease | Pay employees' salaries |
| Operating & No Change | Purchase inventory on account |
| Financing & Decrease | Purchase treasury stock |
| Operating & Increase | Collect payments from customers |
| Operating & Increase | Receive sales-type lease payments |
| Financing & Increase | Issue note payable |
| Operating & Decrease | Pay interest |
| Operating & Decrease | Pay income tax |
| Investing & Increase | Sell land |
| Financing & Decrease | Pay cash dividends |
| Financing & Decrease | Retire bonds |
| Financing & Increase | Sell bonds |
| Financing & Decrease | Pay off mortgage note |
| Operating & Increase | Receive cash dividends |
| Financing & Decrease | Pay financing lease payments |
| Operating & Decrease | Pay financing lease interest |
| Operating & No Change | Make sales on account |
| Direct Method | The cash effect of each operating activity is reported directly |
| Indirect Method | The net cash increase/decrease from operating activities is derived indirectly by starting with reported net income and working backwards to convert that amount to a cash basis |
| Treat them as they are | When using the indirect method and dealing with liabilities how should they be accounted for? |
| Do the inverse | When using the indirect method and dealing with assets how should they be accounted for? |
| Operating activities inflows | Received from customers Received from investments (dividends, interest, selling ST investments) Lessor's receipt of operating lease & sales-type lease payments |
| Operating activities outflows | ST Investments Suppliers Employees Fund pension PA Advertising, rent, and insurance Interest Income Tax Lessee's PMTs for operating leases & interest on financing leases |
| Investing activities inflows | Sale of PPE Sale of intangible assets Sale of LT investments (other companies' stock) Receipt of bond retirement funds |
| Investing activities outflows | Purchase of PPE Purchase of intangible assets Purchase of LT investments (other companies' stocks/bonds) Lessor's proceeds from sale-leaseback transactions |
| Financing activities inflows | Sale of stock Proceeds from exercise of stock options Sale of bonds Proceeds from loan |
| Financing activities outflows | Payment of cash dividends Purchase of treasury stock Retirement of bonds Payment of loan principal Lessee's principal payments made for financing leases |
| Noncash investing & financing activities | Purchase of asset by issuing a note payable Converting debt into common stock Exchanging noncash assets/liabilities (acquiring the ROU asset finance lease or granting the ROU of an asset sales-type lease) |
| Restricted Stock Award | Shares are awarded in the name of employee, but company may retain physical possession; shares are subject to forfeiture if employment is terminated within some specified # of years; employees may not sell shares during vesting period |
Created by:
MOWGaming04
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