Accounting Standards conceptual framwork.txt

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Accounting Standards conceptual framwork.txt
2012-11-03 10:40:20

FAR Homework questions Chapter 1, part 1
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  1. ´╗┐what are the fundamental assumtions of US GAAP
    • Entity Assumptions-econcomic acctivited can be accounted for when an identifiable set of activities (eg a separate corporations, division, etcC)
    • Goging concern assumptions-for financila accounting, its is presumed that the entity will continue to operate in the foreseeable future
    • Monetary unit assumption-it assumed that money is the appropriate basis for which to meashure economic activity
    • Periodicity Assumption-economic activity can be divided ino meaningful time periods
    • Historical cost principal-as a general rule, financial information is accounted for and based on cost, not current market value
    • Revenue recognition principle-as a general rule revenue should be recognized when it is ralized or realizable.
  2. According FASB conceptual framwork,what are the fundamental charcteristics of usfull financial information?
    • Relevance
    • Faithfull
  3. According FASB conceptual framwork, Both of thes charcteristics must be meet for financial information to be usefull?
    • Relevance
    • Faithfull
  4. When is Financial Informaiton relevant?
    financial information is relevant when it is capable of making a difference in the decision made by the users
  5. According FASB conceptual framwork, to be relevant financial information must have what
    • predictive value
    • Confirming value
    • Materiality
  6. when does informaion have Confirming Value?
    when it provides feedback about evaluations previously made by users.
  7. when does informaion have predicitive value?
    when it can be used by users to predict future outcomes
  8. when is information material?
    when its omission our mistatment affects the decisions made by the users
  9. According FASB conceptual framwork, what characteristics must be maximized for information to be faithful represented (reliable)?
    • completeness
    • Neutrality - free fromerrors and bais
  10. Per FASB statment of financial accounting what are the elements of present value (or econcomic value) measurement used to establish the value of assets or liabilities using cash flow information?
    • Remember the mnemonic UVOTE
    • U-the price of bearing Uncertainty
    • V-Expectations about timing Variations of future cash flows
    • O-Other factors (eg liquidity issues and market imperfections
    • T-Time value of money (the risk free rate of interest)
    • E-Estimate fo future cash flows
  11. According FASB and ISAB conceptual framwork, what are the enhancing qualitative charcterisics of usfull information that is relevant and faithfully represented
    • Timeliness
    • Understandability
    • Comparability
    • Verifiability
  12. When assets/equipment is valued at below hitorical cost,and the company is ending operations, what is the approriate mesurment basis?
    Net Realizable value.
  13. how should property plant and equipment be messured on companies balance sheet?
    Historical Cost
  14. how should inventory be messuraed on a companies balance sheet?
  15. How should accounts receviables be messured in a companies balancesheet?
    Net realizable vlaue
  16. How should marketable securities be value on a compnies balancesheet
    Current Market Value
  17. how should longterm debt be valued on a compnies balancesheet
    Present Value of Future Cash flows
  18. when is revenues and gans realized
    revenue is realized when assets are exchnaged for cash or cliams to cash
  19. when is revenue earned
    when the entitiy has substatially accomplished what it must do to be entitled to the nenefuts represented by the revenue
  20. what comprises a full set of financial statments?
    • Statmennt of financial positions (balance sheet)
    • statement of earnings (income statment)
    • Statement of Comprehensive Incom
    • Statement of cash flow
    • Statement of change in owners equity
  21. What information is included in a general purpose financial report ?
    • info about the resource of the enity,
    • info aout the cliams against thhe entity
    • infor about how effectivly and efficiently the entity's governing board has discharged its responsibility to use the entity's resourcces
  22. According to the FASB conceptual framework the process of recording an item in the financial statments is what
  23. According FASB conceptual framwork, the primary users of the financial statments are?
    • investors
    • creditors
    • lenders
  24. what is the single source of authoritative nongovernmental US GAAP
    The FASB Accounting Standards Codification