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F1 - M1 Standards and Conceptual Framework
Terms in this set (17)
Name the single source of authoritative nongovernmental U.S. GAAP.
The FASB Accounting Standards Codification (ASC)
Who are the primary users of general purpose financial reports?
existing and potential
Name the fundamental qualitative characteristics of useful financial information.
relevance and faithful representation
name 3 elements of relevance
(PCM - passing confirms money)
1. Predictive value: can be used by users to predict future outcomes
2. Confirmatory value: provides feedback about evaluations previously made by users
3. Materiality - could affect the decisions made by users; it is entity specific (there are small and big entities = different materiality); FASB has not specified a uniform quantitative threshold for materiality
name 3 elements of faithful representation
Completely neutral is free from error
1. Complete: need primary FS and notes
2. Neutral: free from bias
3. Free from (material) error: free from error does not require perfect accuracy
Name the enhancing qualitative characteristics of financial information.
compare and verify in time to understand
-Information is more useful if it can be compared with similar information about other entities or from other time periods.
-Consistency - trend analysis
Verifiability: independent observers can reach consensus that a particular depiction is faithfully represented
Timeliness: available to users in time
Understandability - presented clearly and concise
Name the pervasive constraint on the information provided in financial reporting.
cost constraint - benefits of reporting financial information must be greater than the costs of obtaining and presenting the information
According to SFAC No. 5, what should a full set of financial statements include?
-financial position (BS) - financial risk
-earnings (IS) - performance, operating risk
-comprehensive income - PUFE
-cash flows - where did you get your money from and where did you spend it
-changes in owners' equity - why did equity go up or down?
List the 10 elements of financial statements according to SFAC #6
REGL ALE ID
-Revenues - part of normal operations - selling your inventory or services
-Expenses - part of normal operations - COGS, SG&A, Depreciation, etc.
-Gains - nonoperating (ex. Sale of non inventory (PP&E)
-Losses - nonoperating (ex. Sale of non inventory (PP&E)
Balance Sheet (ALE)
-Assets - probable future economic benefit
-Liabilities - probable future sacrifices of economic benefits
-Equities (or Net Assets) - residual interest in assets of the company remains after deducting its liability (A-L=E)
Excluded from comprehensive income (ID)
-Investments by Owners - not revenue - not on IS
-Distributions to Owners - not revenue - not on IS
Comprehensive Income - sum of net income per the IS + OCI "PUFE"
name the 5 elements of present value measurement per SFAC No. 7
1. Estimate of future cash flow
2. Expectations about time variations of future cash flows
3. Time value of money
4. The price for bearing uncertainty
5. Other factors (e.g., liquidity issues and market imperfections)
Describe the expected cash flow approach for present value computations.
considers a range of possible cash flows and assigns a (subjective) probability to each cash flow in the range to determine the weighted average, or "expected," future cash flow
economic activity can be accounted for when considering an identifiable set of activities (separate corp or division)
going concern assumption
the entity will continue to operate in the foreseeable future.
monetary unit assumption
assumed that money is an appropriate basis by which to measure economic activity
Economic activity can be divided into meaningful time periods (ex. quarters/years - quarterly reports and annual reports)
allows assets and liabilities to be measured at various bases (historical cost, fair value, net realizable value, and present value of future cash flows)
record w/o an exchange of cash (receiving and paying cash are not required to record revenue)
revenues are recognized when the performance obligation is satisfied and expenses are recognized in the same period as the related ervenue, not necessarily in the period which the cash is received or expended by the company
Sets with similar terms
FAR 1: M1
FAR - Standards and Conceptual Framework
Accounting Ch 2
MGA 301 Chapter 2
Sets found in the same folder
F1 - M2 - Income Statement and Balance Sheet
F1 - M3 - Revenue Recognition: Part 1
F1 - M4 - Revenue Recognition: Part 2
F1 - M5 - Income Statement: Discontinued Operations
Other sets by this creator
F7 - M5 - statement of cash flows
F7 - M4 - Earnings per share
F7 - M3 - Stock compensation
F7 - M2 - Stockholders' Equity: Part 2
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