AC353 Test #1

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  1. Reporting standards for public companies and other publicly-accountable enterprises
  2. Reporting standards for private non-publicly accountable companies
    • IFRS
    • ASPE
    • Disclosed basis of accounting (tailored accounting policies)
  3. Objectives of financial reporting (6)
    • facts (e.g., public or private, type of business)
    • constraints
    • preparer motivations
    • accounting choice process
    • user needs
    • user power
  4. Constraints (3)
    • GAAP requirements
    • audit requirements
    • regulatory requirements
  5. Preparer motivations (6)
    • income tax deferral
    • earnings management
    • contract compliance
    • minimum compliance
    • special entity-specific motivations
  6. User needs (4)
    • cash flow assessment and prediction
    • contract compliance
    • performance evaluation
    • special entity-specific needs
  7. User power (3)
    • shareholders
    • lenders
    • regulators
  8. a person who is responsible for managing an enterprise on behalf of someone else
  9. the motivaion of managers to reveal the least amount of information that is possible while still complying with GAAP
    minimum compliance
  10. The International Accounting Standards Board has authority for setting Canadian accounting standards.
    True or False
  11. All Canadian corporations must comply with international accounting standards.
    True or False
    False - private corporations don't
  12. IFRS were developed in order to facilitate international capital markets.
    True or False
  13. IFRS must be used for the financial statements of every Canadian public corporation.
    True or False
  14. The primary objective of general purpose financial reporting is to serve the information about an enterprise's financial performance.
    True or False
  15. Income tax law has no impact on the accounting choices made by management.
    True or False
  16. The presence of a control block can have an impact on a public company's choice of accounting policies.
    True or False
  17. Most Canadian corporations are listed on the Toronto Stock Exchange.
    True or False
  18. IFRS and the CICA Handbook, Part II, have equal status in Canada for financial reporting.
  19. In a private corporation, the needs of external users have no impact on the company's financial reporting objectives.
    True or False
  20. Canadian accounting standards are governed by the Canadian Business Corporation Act.
    True or False
  21. The debt and equity securities of a private company cannot be traded on public exchanges. Therefore, private companies have no external sources of financing.
    True or False
  22. When an enterprise's primary reporting objective is cash flow assessment, the enterprise will use a cash basis of reporting rather than an accrual basis.
    True or False
    False - matching principle
  23. Accounting Concepts or Principles (3)
    • underlying assumptions
    • qualitative characteristics
    • measurement methods
  24. Underlying Assumptions (6)
    • time period
    • separate entity
    • unit of measure
    • continuity
    • proprietary application
    • stable currency
  25. These form the basic foundation upon which accounting measurement rests
    underlying assumptions
  26. the criteria that, in conjunction with the org's reporting objectives, facts, and constraints, are used to evaluate the possible measurement options and choose the most appropriate measurement methods for the given situation
    qualitative characteristics (qualitative criteria)
  27. The various ways in which financial position and the results of operations can be reported
    measurement methods
  28. Qualitative Characteristics (8)
    • relevance
    • representational faithfulness
    • comparability
    • verifiability
    • timeliness
    • understandability
    • materiality
    • cost/benefit
  29. The processs of making (or recommending) choices in accounting is the process of exercising...
    Professional judgement
  30. Factors to consider for professional ethical judgement (4)
    • the users of the financial statements, and their specific information needs
    • the motivations of managers
    • the organization's operations
    • the organization's reporting constraints, if any
  31. meaningful information can be assembled and reported for a time period that is less than the enterprise's life span
  32. the enterprise can be accounted for and reported independent of its owners and other stakeholders
    separate entity
  33. the results of the enterprise's operations can meaningfully be measured in monetary terms
    unit of measure
  34. the enterprise will continue in operation for a reasonable future period
    continuity (also known as the going-concern assumption)
  35. the results of the enterprise's operations should be reported from the viewpoint of its owners
    proprietary approach
  36. the value of the measurement currency does not change frrom year to year; the enterprise has generated a profit if its revenues are higher than th historical cost of the resources used
    stable currency
  37. the capacity of accounting information to make a difference to the external decision-makers who use financial reports
  38. Two qualities that contribute to relevance
    • predictive value
    • confimatory value
  39. Subcomponents of representational faithfulness (3)
    • completeness
    • neutrality
    • freedom from material error
  40. applying accounting concepts and principles from period to period in the same manner
  41. Aspects to verifiability (2)
    • the accounting measure is a resonable measure of the economic event, without material error or bias
    • independent observers, using the same measurement methods, would reach substantially the same conclusion
  42. any accounting measurement or disclosure should result in greater benefits to the users than it costs to prepare and present (benefits should exceed costs)
    cost/benefit tradeoff
  43. the process of determining the amount at which an item is recognized in the financial statements
  44. Four pervasive measurement conventions
    • historical cost
    • revenue recognition
    • expense recogniton
    • full disclosure
  45. Three measurement levels
    • quoted prices in active markets for identical assets
    • prices for similar assets or that can be derived from observable market data
    • values derived by indirect valuation techniques, not verifiable by direct observation of market data
  46. 3 criteria for recognition
    • the item meets the definition of a financial statement element
    • the item has an appropriate basis of measurement, and a reasonable estimate can be made of the amount
    • for assets and liabilities, it is probable that the economic benefits will be received or given up (ie realized)
  47. the accounting recognition of assets and liabilities that have not yet been realized as a cash flow
  48. the delayed recognition of costs and receipts that have been realized through cash flows, but have not yet contributed to the earnings process as expenses and revenues
  49. Revenue definitions (3)
    • inflows of cash, increases in accounts receivable, or other increases in a business's assets
    • settlements of liabilities
    • a combination of the two
  50. 3 conditions to be met for revenue recognition
    • all significant acts required of the seller have been performed, and the risks and rewards of ownership have passed to and been accepted by the buyer
    • consideration is measurable
    • collection is reasonably assured
  51. the financial statements should report all relevant information bearing on the economic affairs of business enterprise
    full disclosure
  52. building blocks of financial statements
  53. Six elements
    • assets
    • liabilities
    • owners' equity/net assets
    • revenues/gains
    • expenses/losses
    • other comprehensive income
  54. Financial Statements required by IFRS (4)
    • statement of financial position (balance sheet)
    • statement of comprehensive income (income statement)
    • statement of changes in equity
    • statement of cash flows
  55. Elements on a statement of financial position
    • assets
    • liabilities
    • owners' equity/net assets
  56. Elements on a statement of comprehensive income (3)
    • revenues/gains
    • expenses/losses
    • other comprehensive income
  57. economic resources controlled by an entity as a result of past transactions or events from which future economic benefits may be obtained
  58. To qualify as assets, the resources involved must: (3)
    • have future economic benefits
    • be under the entity's current control
    • result from past transactions
  59. Obligations of an entity arising from past transactions or events, the settlement of which will result in the transfer or use of assets, provision of services, or yielding of other economic benefits in the future
  60. To qualify as liabilities, obligations must: (3)
    • require future transfer of assets or economic benefits
    • be an unavoidable current obligation
    • result from past transactions
  61. the residual of assets minus liabilities
    owners' equity or net assets
  62. any increases in economic resources resulting from the activities of an entity
    income (both revenues and gains)
  63. decreases in economic resources resulting from the income-generating activities of an entity
    expenses and losses
  64. increases and decreases in net assets that are specifically excluded from net income by IFRS and do not reflect transactions with owners in their capacity as owners
    other comprehensive income
  65. using up of assets or incurrence of liabilities
    expenses and losses
  66. probable future economic benefits obtainedd by an entity
  67. enhancement of assets or settlements of liabilities
    revenue and gains
  68. residual interest in assets after deducting liabilities
    owners' equity/net assets
  69. increases in net assets from peripheral or incidental transactions from the entity
  70. changes in net assets from peripheral or incidental transactions of the entity
    gains and losses
  71. future sacrifices arising from past transactions
  72. results from the entity's ongoing major or central operation
    revenues and expenses
  73. calculation of shareholders' equity
    income avail. to common shareholder weighted avg. of common shares
Card Set:
AC353 Test #1
2011-10-31 02:54:43
financial accounting

chapters 1, 2, 3
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